Management Accounting_Working Capital in Hotel Industry.pdf

8/16/2019 Management Accounting_Working Capital in Hotel Industry.pdf

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Section B Managerial Accounting – 1 Group 10

Working Capital in Hotel Industry in India

Managerial Accounting -1

Term -1

PGPM 2015-17

Faculty:

Dr. Sandeep Goel

Submitted by:

Somyata Rastogi (15P070)

Deval Nigam (15P080)

Lipika Agarwal (15P090)

Pallav Singhal (15P097)

Pushkar Singh (15P100)

Shrey Bhat (15P110)

Vikas Gupta (15P120)


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CONTENTS

Introduction of working capital ........................................................... 2

significance Of Working Capital in business ...................................... 3

Brief overview of hotel industry in india ............................................ 3

Working capital for hotel industry....................................................... 5

Important Ratios ...................................................................... 5

Mhril (Club Mahindra) ........................................................................ 7

Financial statements of club mahindra .................................... 8

Oberoi hotels ...................................................................................... 10

Financial statements oberoi ................................................... 12

Indian Hotels Company Limited ....................................................... 14

Financial statements of ihcl ................................................... 17

ratio analysis ...................................................................................... 19

Current and Cash Ratio .......................................................... 19

Cash Ratio .............................................................................. 20

Creditors turnover Ratio ........................................................ 23

Inventories turnover Ratio ..................................................... 25

Future scenario of Hospitality Sector in India ................................... 28


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INTRODUCTION OF WORKING CAPITAL

Working capital is defined as:

Working Capital = Current Assets - Current Liabilities

It signifies that weather the companies have sufficient financial current assets to pay for the

current liability. To measure company’s short term financial health, we define working

capital ratio as Current Assets/Current L iabil iti es . Anything less than 1 indicates negative

working capital. On the other side ratio more than 2 signify that companies not investing its

current assets optimally.

Working capital management involves the relationship between a firm's short term assets

and short-term liabilities. The goal of working capital management is to ensure that a firm is

able to continue its operations and that it has sufficient funds to fulfill both short-termmaturing debt and upcoming operational expenses. It involves managing inventories,

accounts receivable, payable and cash.

If a company’s current liability exceeds current assets, then in general it may face difficulty

to pay for suppliers or meeting its cash requirement of operations in short run. In the worst

case scenario this may lead to bankruptcy. So declining working capital over the years is a

sign for investors to withdraw their money from the business. But keeping high working

capital is also not desired as this leads to low profitability of the company. This scenario can

arise due to various reasons such as high inventory, low debtors’ payout or high cash balance.

The important aspects of working capital management are ratio analysis and management of

individual components of working capital. A few key performance ratios of a working

capital management system are the working capital ratio, cash and quick ratio, inventory

turnover and the collection ratio. Ratio gives management a direction to identify areas of

focus such as inventory management, cash management, and accounts receivable and

payable management for improvement. But ratio should not be used in isolation, past trend

and industry average should be looked for further understanding.


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SIGNIFICANCE OF WORKING CAPITAL IN BUSINESS

Working capital is very essential for any given business. It is life blood and nerve center of

the business. Working capital is very essential to maintain smooth running of a business. No

business can run successfully without an adequate amount of working capital. The mainadvantages or importance of working capital are as follows:

1. Strengthen The Solvency

Working capital helps to operate the business smoothly without any financial

problem for making the payment of short-term liabilities. Purchase of raw

materials and payment of salary, wages and overhead can be made without any delay.

Adequate working capital helps in maintaining solvency of the business by providing

uninterrupted flow of production.

2. Enhance Goodwill Sufficient working capital enables a business concern to make prompt payments and

hence helps in creating and maintaining goodwill. Goodwill is enhanced because all

current liabilities and operating expenses are paid on time.

3. Easy Obtaining Loan

A firm having adequate working capital, high solvency and good credit rating can

arrange loans from banks and financial institutions in easy and favorable terms.

4. Smooth supply of Raw Material

Timely payment to the supplier ensures smooth supply of raw material. Also a healthyworking capital ratio boosts supplier confidence in the operation of the company. This

also enhances negotiation power of the company.

5. Ability to Face Crisis

Adequate working capital shields the given company from unexpected market shocks.

For any IT companies it is essential to maintain high cash so that they can manage

better in case of uncertainty in the global market.

BRIEF OVERVIEW OF HOTEL INDUSTRY IN INDIA

The Indian hotel industry is one of the key drivers of growth of the services sector in India.

The hospitality industry growth has always depended on the tourism industry. There is a lot

of potential for growth of hospitality and tourism industry in India due to worldwide


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industrial and technological development, increasing purchasing power parity, economic

growth of tourists producing nations, improved transport and communication means etc.

According to the ICRA report for FY 2014 – 15, Indian hotel industry's revenues increase by

7-9% mainly driven by incremental rooms, food and beverage income. Average Room Rates(ARRs) were flat but occupancies improved by 2-4%. Domestic demand has showcased a

growth of over 10%, driven by both business and leisure travelers. However, falling global

economic sentiments have affected inbound travel and this is estimated to continue in

current FY due to low growth prospect of world GDP. Also as per this report, in India over

29,000 premium rooms are under construction and to be launched over the next six years.

This shows that the growth potential of hotel industry in upcoming time.

The Indian hotel industry is highly fragmented with a large number of small and

unorganized players (standalone hotels) accounting for a high share of the industry. Thisindustry is highly labor intensive and the income earning patterns are highly seasonal. Few

major players in the organized segment include:

Name of the Company Hotel Brand Name

Public Sector:

1. India Tourism Development The Ashok

Corporation Limited (ITDCL)

Private Sector:

1. East India Hotels Limited (EIHL) The Oberoi

2. Asian Hotels Limited (AHL) Hyatt Regency

3. ITC Hotels Limited (ITCHL) Welcome

4. Indian Hotels Company Limited (IHCL) Taj

5. U.P. Hotels Limited (UPHL) Clarks

6. Bharat Hotels Limited (BHL) The Grand

7. Apeejay Surrendra Park Hotels Limited (ASPHL) The Park

http://www.dnaindia.com/topic/hotelhttp://www.dnaindia.com/topic/hotel


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8. A B Hotels Limited (ABHL) Radisson

WORKING CAPITAL FOR HOTEL INDUSTRY

Working capital in hotel industry is as important as in other industry. Working capital isrequired to finance supplies such as stores, spares, crockery, food and beverages (including

liquor) etc. and also to meet out the operating expenses such as employees and staff person

salaries, electricity charges, other bill and payables. Some of the important ratios significant

for this industry is as follows:

IMPORTANT RATIOS

1. Current Ratio (Current assets/Current Liabilities): Indicates the company’s ability to

meet its short term liabilities. Range of ratio should be in between 1.2 – 2.0

2. Cash Ratio (Cash and Bank balances/Current liabilities): This ratio is a measure of

the company’s ability to pay off its short term debt and obligations through ready

available cash. Range of ratio should be around 0.5 – 1

3. Debtor’s turnover Ratio (Sales/Accounts Receivable): It is a measure of the

performance of the credit sales of the company. High ratio is desired by the company. It

is also used to calculate the average collection period. Average collection period = ( 365/Debtor’s Turnover Ratio ) days

It signifies that how long customers enjoy free credit of the company in a year.

4. Inventory Turnover Ratio (COGS/ Inventory): It tells us that how soon the company

is able to convert its raw materials into inventory and inventory into sales. It is used to

calculate average inventory holding period.

Average inventory holding period = (365/Inventory Turnover Ratio) days

This determines how better a company is managing its inventory.

5. Creditors’ Turnover Ratio (COGS/Accounts Payable): It is a measure of the

company’s portion of purchases made on credit. Low ratio is better for any company as it

signifies that how much money of our supplier is funding our operations. This ratio is

used to calculate average payment period


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Average payment period ( 365/Creditor’s Turnover Ratio) days

It shows how long a company takes to pay off its suppliers.

6. Cash Conversion Cycle (CCC = Average Collection Period (ACP) + Average

Holding Period (AHP) – Average Payment Period (APP) (in Days)): This is ameasure of how long a company’s cash remains tied up in inventories and accounts

receivable.


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MHRIL (CLUB MAHINDRA)

Mahindra Holidays & Resorts India Ltd. (MHRIL), a part of the Mahindra Group, was

founded in 1996 to provide holidays on a timeshare basis. MHRIL includes the brands Club

Mahindra Holidays, Club Mahindra Fun days and Zest.

Club Mahindra started with a single resort in Munnar. Presently, the company operates 45

resorts in India and abroad. Mahindra Holidays & Resorts India Limited is a leading player

in the leisure hospitality industry. It has established vacation ownership in India, and is the

market leader in the business. It offers holidays to its customers that are designed for the

discerning and differentiated needs of families. Apart from providing quality rooms in the

form of furnished apartments and cottages at resorts in unique and popular destinations,

Mahindra Holidays offers its members other amenities including fun dining, holiday

activities, spa and wellness facilities.

Club Mahindra Holidays’ is the Company’s flagship product in the vacation ownership

business, which entitles its members a week’s holiday every year for a period of 10 or 25

years depending on the membership. Mahindra Holidays has recorded good growth in its

membership over the last few years despite some challenging years and believes that there is

a significant potential for further growth of vacation ownership business in India with the

economic growth.

Key Happenings:

During the year under review, Competent Hotels Private Limited (CHPL), became a wholly

owned subsidiary of the company with effect from June 18, 2014. CHPL own and operate a

resort property at Manali, Himachal Pradesh.

Gables Promoters Private Limited (GPPL), is the wholly owned subsidiary company of

MHRIL. GPPL is currently developing a resort property of around 100 rooms at Naldhera,

Shimla, Himachal Pradesh.


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FINANCIAL STATEMENTS OF CLUB MAHINDRA

Balance Sheet for 2012-15(In millions of rupees):

31-Mar-15 31-Mar-14 31-Mar-13 31-Mar-12

EQUITY AND LIABIL ITI ES

Shareholders’ Funds

Share capital 880.26 880.24 838.81 838.46

Employee stock option outstanding 0.24 0.00 0.00 0.00

Reserves and Surplus 6,428.44 7,017.35 5,504.35 4,849.96

7,308.94 7,897.59 6,343.16 5,688.41

MINORITY INTEREST

Non-Current liabili ties

Deferred Income Entitlement fee 15,086.63 13,930.73 12,531.05 10,679.17

Deferred tax liabilities(net) 604.41 589.83 411.98 366.33

Other long term liabilities 50.44 71.08 54.02 59.05

Long term provisions 49.76 40.94 40.70 14.65

15,791.25 14,632.58 13,037.75 11,119.20

Current liabili ties

Short term borrowings 64.12 29.14 19.50 7.92

Trade payables 1,137.11 1,161.92 774.22 760.61

Deferred Income - Entitlement fee 851.78 751.10 600.74 551.18

Deferred Income - Annual Subscription fee 817.29 662.57 0.00 0.00

Other current liabilities 739.62 559.37 1,248.68 1,201.73

Short term provisions 429.13 417.24 419.21 402.09

4,039.05 3,581.34 3,062.35 2,923.54

Total 27,139.23 26,111.51 22,443.26 19,731.15

ASSETS

Non-cur rent assets

F ixed Assets

Tangible assets 7,734.80 6,669.44 4,488.38 4,394.56

Intangible assets 224.35 226.27 33.24 15.66

Capital work in progress 643.83 636.43 2,314.21 1,836.38

Intangible assets under development 73.09 45.53 212.03 118.03

8,676.08 7,577.68 7,047.86 6,364.64

Non-current investments 1,415.02 1,460.75 1,756.89 823.22


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Long term loans and advances 1,956.28 1,801.68 1,512.40 1,290.46

Other Non-current assets 4,370.24 3,844.17 3,296.27 3,633.62

16,417.61 14,684.27 13,613.41 12,111.94

Cur rent assets

Current investments 95.83 126.65 102.24 1,261.70

Inventories 53.36 95.90 63.80 36.70

Trade receivables 8,704.47 8,434.16 6,259.83 5,180.51

Cash and cash equivalents 166.14 386.79 338.44 83.95

Short term loans and advances 1,539.49 2,181.14 1,974.97 1,041.67

Other current assets 162.33 202.60 90.57 14.68

10,721.62 11,427.24 8,829.85 7,619.21

27,139.23 26,111.51 22,443.26 19,731.15

PL statement for 2011-15(In millions of Rupees):

2014-15 2013-14 2012-13 2011-12

Revenue from operations 7948.51 7775.20 6585.37 5738.30

Other income 127.07 214.10 574.02 627.46

Total Revenue 8075.58 7989.30 7159.39 6365.76

EXPENDITURE

Food and Beverages Consumed 0.00 0.00 0.00 0.00 Employee benefits expense 1619.77 1617.37 1495.24 1264.22

Finance costs 2.50 9.68 16.00 3.51

Depreciation and Amortization expense 654.06 380.27 211.91 203.41

Other expenses 4530.80 4567.77 3847.72 3439.46

Total Expenditure 6807.13 6575.10 5570.87 4910.59

Profit before exceptional item and tax 1268.45 1414.20 1588.52 1455.16

Exceptional item - 218.80 0.00 0.00 0.00

Prof it before tax 1049.65 1414.20 1588.52 1455.16

Less : Tax expense

- Current tax 192.00 291.00 473.10 410.20

- Deferred tax 67.41 177.85 45.64 -1.44

Profit for the year 790.24 945.35 1069.78 1046.41


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OBEROI HOTELS

The foundations of the Oberoi Group dates back to 1934 when Rai Bahadur Mohan Singh

Oberoi, the founder Chairman of the group bought from an Englishman; two properties -

The Clarke's in Delhi and The Clarke's in Shimla. In the following years Mr. Oberoi,assisted by his two sons, Tilak Raj Singh Oberoi and Prithvi Raj Singh Oberoi continued the

expansion of their group with properties both in India and abroad.

Today, P.R.S.Oberoi is the Chairman of The Oberoi Group and his son, Vikram Oberoi and

his nephew, Arjun Oberoi serve in the capacities of Joint Managing Directors at EIH Ltd and

EIH Associated Hotels, the two major holding companies of The Oberoi Group.

EIH Limited, under the aegis of The Oberoi Group, operates hotels and cruisers in five

countries under the luxury ‘Oberoi’ and five-star ‘Trident’ brands. Oberoi Hotels & Resorts

is synonymous the world over with providing the right blend of service, luxury and quiet

efficiency. Internationally acclaimed for all-round excellence and unparalleled levels of

service, Oberoi hotels and resorts have received innumerable awards and accolades. The last

decade has witnessed the debut of new luxury Oberoi leisure hotels in India and abroad.

Trident hotels are five-star hotels that have established a reputation for excellence and are

acknowledged for offering quality and value. The Group’s commitment to excellence,

attention to detail and personalized service has ensured a loyal list of guests and accolades in

the worldwide hospitality industry.

Key Happenings:

The Oberoi Al Zorah located in the United Arab Emirates is currently under construction.

The ocean front site is part of a prestigious real estate venture incorporating a luxury

residential and retail development and an 18-hole Golf Course. The hotel is expected to open

in the second quarter of 2016.

The Oberoi, Marrakesh is under construction. In addition to the luxury hotel, Oberoi branded

villas for sale are planned within the development. The hotel is scheduled to open in April,

2016. Construction of The Oberoi, Casablanca is in progress. The hotel is located on a prime

ocean front site close to the central business district. The hotel is scheduled to open in the

last quarter of 2018. The Oberoi, Al Zorah, The Oberoi Marrakesh and The Oberoi

Casablanca will all be managed by a wholly owned subsidiary of the Company.


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Construction of the Oberoi Sukhvilas is currently underway. The property is located on the

outskirts of Chandigarh, adjoining a 400-acre forest. The 20-acre hotel site consists of luxury

villas with private swimming pools surrounded by extensive landscaped gardens. The hotel

will be managed by the Company and is scheduled to open in April, 2016. Planning consent

for the Company’s 55-acre beach front site at Goa has been received. Government andenvironmental approvals are in the process of being obtained.

Planning in respect of The Oberoi Hotel and luxury branded residences in Bengaluru is

presently in progress. Design and planning of The Oberoi, Doha has been initiated. Located

on a prime site in the central business district of the city, the hotel will consist of 244 rooms

and 44 service apartments. The hotel is scheduled to open in the first quarter of 2019 and

will be managed by an overseas subsidiary of the Company.

Planning and design of The Oberoi luxury service apartments in Lusail, Qatar is in progress.Located on the outskirts of Doha, the iconic ocean front building will consist of 182 luxury

apartments and is scheduled to open in the first quarter of 2018. The development will be

managed by an overseas subsidiary of the Company.


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FINANCIAL STATEMENTS OBEROI


31-Mar-15 31-Mar-14 31-Mar-13 31-Mar-12

EQUITY AND LIABI LI TIES

SHAREHOLDERS FUNDS

SHARE CAPITAL 1,143.10 1,143.14 1,143.14 1,143.14

RESERVES AND SURPLUS 24,956.72 25,008.94 24,810.25 24,774.62

26,099.86 26,152.08 25,953.39 25,917.76

MINORITY INTEREST 777.04 586.73 547.76 411.90

NON-CURRENT LI ABI LI TI ES

LONG TERM BORROWINGS 2,196.15 2,530.77 3,818.75 3,476.85

DEFERRED TAX LIABILITIES - NET 1,963.35 1,939.72 1,700.70 1,687.97

OTHER LONG TERM LIABILITIES 504.89 451.82 463.97 504.51

LONG TERM PROVISIONS 177.76 160.23 143.40 136.28

4,842.15 5,082.54 6,126.82 5,805.61

CURRENT L IABI LI TIES

SHORT TERM BORROWINGS 1,044.76 1,394.16 2,896.66 918.21

TRADE PAYABLES 1,053.41 1,105.21 849.37 770.97

OTHER CURRENT LIABILITIES 2,558.51 1,930.56 2,175.11 2,430.66

SHORT TERM PROVISIONS 815.49 790.81 719.08 816.34

5,472.17 5,220.74 6,640.22 4,936.18

TOTAL 37,191.22 37,042.09 39,268.19 37,071.45

ASSETS

NON-CURRENT ASSETS

FI XED ASSETS

TANGIBLE ASSETS 22,829.94 23,845.39 24,746.82 23,679.64

INTANGIBLE ASSETS 5.78 6.99 11.89 8.57

CAPITA L WORK-IN-PROGRESS 855.59 500.43 2,299.78 3,161.53

INTANGIBLE ASSETS UNDER

DEVELOPMENT

69.62 -

GOODWILL (ON CONSOLIDATION) 3,315.03 3,254.28 3,264.05 3,088.05


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NON -CURRENT INVESTMENTS 2,540.82 2,465.39 1,909.07 1,233.26

LONG TERM LOANS AND ADVANCES 2,347.23 2,334.11 2,306.82 1,995.25

OTHER NON-CURRENT ASSETS - - 0.43 11.45

31,964.01 32,406.59 34,538.86 33,177.75

CURRENT ASSETS

106.98 116.90

INVENTORIES 485.05 502.98 450.18 435.54

TRAD E RECEIVABLES 2,231.22 2,020.85 2,054.01 1,691.18

CASH AND BANK BALANCES 1,986.98 1,641.18 1,525.80 1,252.13

SHORT TERM LOANS AND ADVANCES 518.30 465.24 552.03 373.62

OTHER CURRENT ASSETS 5.66 5.25 40.33 24.33

5,227.21 4,635.50 4,729.33 3,893.70

TOTAL 37,191.22 37,042.09 39,268.19 37,071.45


2014-15 2013-14 2012-13 2011-12


Other income 289.08 312.50 360.89 420.40

Total Revenue 16971.80 15778.22 15045.66 14492.22

EXPENDITURE

Food and Beverages Consumed 2214.08 2070.22 1950.87 1816.41

Employee benefits expense 4260.90 3914.35 3918.41 3683.60

Finance costs 461.84 527.06 716.48 704.18


Other expenses 6906.36 6146.02 6040.99 5413.73



Exceptional item - 118.44 -150.66 111.46

Profit before tax 1450.55 1824.75 739.94 1688.19

Less : Tax expense

- Current tax 656.84 479.21 258.63 342.64

- Deferred tax 123.45 235.49 11.94 137.75

Profit for the year 670.26 1110.05 469.37 1207.80


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INDIAN HOTELS COMPANY LIMITED

The Indian Hotels Company Limited (IHCL) and its subsidiaries are collectively known as

Taj Hotels Resorts and Palaces and is recognised as one of Asia's largest and finest hotel

company. Incorporated by the founder of the Tata Group, Mr. Jamsetji N. Tata, thecompany opened its first property, The Taj Mahal Palace Hotel, Bombay in 1903. The Taj,

a symbol of Indian hospitality, completed its centenary year in 2003.

Taj Hotels Resorts and Palaces comprises 93 hotels in 55 locations across India with an

additional 16 international hotels in the Maldives, Malaysia, Australia, UK, USA, Bhutan,

Sri Lanka, Africa and the Middle East.

IHCL operate in the luxury, premium, mid-market and value segments of the market

through the following:

Taj (luxury full-service hotels, resorts and palaces) is the flagship brand for the company.

Spanning world-renowned landmarks, modern business hotels, idyllic beach resorts,

authentic Rajput palaces and rustic safari lodges, each Taj hotel reinterprets the tradition

of hospitality in a refreshingly modern way to create unique experiences and lifelong

memories.

Taj Exotica is their resort and spa brand found in the most exotic and relaxing locales of

the world. The properties are defined by the privacy and intimacy they provide. They are

defined by a sensibility of intimate design and by their varied and eclectic culinary

experiences, impeccable service and authentic Indian Spa sanctuaries.

Taj Safaris are wildlife lodges that allow travellers to experience the unparalleled beauty of

the Indian jungle amidst luxurious surroundings. They offer India's first and only wildlife

luxury lodge circuit.

Vivanta by Taj Hotels & Resorts span options for the work-hard-play-hard traveller

across metropolitan cities, other commercially important centers as well as some of the

best-loved vacation spots. Innovative cuisine concepts, the smart use of technology & the

challenge to constantly engage, energize and relax you all add up to make Vivanta by Taj

the new signature in hospitality.


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The Gateway Hotel (upscale/mid-market full service hotels and resorts) is a pan-India

network of hotels and resorts that offers business and leisure travelers a hotel designed,

keeping the modern nomad in mind. At the Gateway Hotel, we believe in keeping things

simple. This is why their hotels are divided into 7 simple zones- Stay, Hangout, Meet,

Work, Workout, Unwind and Explore.

Ginger (economy hotels) is IHCL's revolutionary concept in hospitality for the value

segment. Intelligently designed facilities, consistency and affordability are hallmarks of

this brand targeted at travelers who value simplicity and self-service.

New Hotel Launches:

Taj Group continued on its expansion path in India as well as in international markets in2014. The company ended the year with a portfolio spanning 27 hotels in the Taj brand,

39 Vivanta by Taj Hotels & Resorts and 32 Gateway Hotels.

Taj Hotels Resorts and Palaces (Luxury Hotels)

• Launch of Taj Dubai: The Taj Group extended its international footprint with the

opening of the 296 key Taj Dubai located in the prestigious Burj Khalifa District,

downtown area of Dubai. The launch was ably supported by the campaign – “Service

Tailored to Perfection” which was released in the Gulf and Indian markets.

• Repositioning of Taj Exotica Resort & Spa (TERS), Maldives: This year, a new

campaign was launched for TERS "Discover Taj Time" to provide unique and

differentiated moments to the guests. This includes a series of refreshed guest experiences

to bring to life the concept of Taj Time.

Vivanta by Taj Hotels & Resorts (Upper Upscale Hotels)

• Vivanta by Taj – Dwarka, New Delhi: This is the 30th Vivanta by Taj hotel in the Taj

portfolio and seventh hotel for The Taj Group in the National Capital Region.Strategically located within close proximity to the airport and business district of Gurgaon,

the hotel is a short drive away from Lutyens Delhi.


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• The Rebak Island Resort, Langkawi rebranded as Vivanta by Taj – Rebak Island,

Langkawi

The Gateway Hotels & Resorts (Upscale Hotels)

• The Gateway Hotel, GE Road, Raipur: The Company launched its first hotel in the

central Indian state of Chattisgarh with the commercial opening of the hotel in April 2014.

Built on 3.5 acres of prime real estate, The Gateway Hotel, GE Road, Raipur is optimally

located in the heart of the city center and in close proximity of the central business

districts.

The Gateway Hotel, GE Road, Raipur: The Company launched its first hotel in the

central Indian state of Chattisgarh with the commercial opening of the hotel in April 2014.

Built on 3.5 acres of prime real estate, The Gateway Hotel, GE Road, Raipur is optimally

located in the heart of the city center and in close proximity of the central business

districts.

• The Gateway Hotel, Balaghat Road, Gondia: It was the first Gateway branded hotel in

the Vidharbha region of Maharashtra launched in August 2014. Located on Balaghat Road

and in close proximity to the principal attractions of the region, it is the first full service

hotel in the city and the first one from the Taj Group in this part of the country.

• The Gateway Resort, Damdama Lake, Gurgaon: Was launched in November 2014,

marking the debut of the ‘Resort’ brand from Gateway. Positioned as the ‘Urban

Sanctuary for the Modern Nomad’, the resort provides the much sought after ‘detox’

solutions to our group targets, the ‘Millennial Traveller’.

Ginger Hotels

• Ginger Hotel, Vishakhapatnam: Launched in December 2014 at Dwaraka Nagar, the

hotel comprises 72 smartly furnished rooms designed to make guests’ stay comfortable

and convenient.

• Ginger Hotel, Katra, Jammu: Launched in March 2015, it is an 80 room hotel, located

at a distance of 1.5 kms from Ban Ganga which is the starting point towards Shri Mata

Vaishno Devi temple


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FINANCIAL STATEMENTS OF IHCL


31-Mar-15 31-Mar-14 31-Mar-13 31-Mar-12

EQUITY AND LIABI LI TIES

SHAREHOLDERS FUNDS

SHARE CAPITAL 807.50 807.50 807.50 759.50

RESERVES AND SURPLUS 25,344.00 26,130.90 32,260.00 31,760.00

26,151.50 26,938.40 33,070.00 33,770.00

MINORITY INTEREST

NON-CURRENT LI ABI LI TI ES 20,390.00

LONG TERM BORROWINGS 28,981.00 21,535.00 22,680.00 950.00

DEFERRED TAX LIABILITIES - NET 1,910.00 1,070.00 950.00 740.00

OTHER LONG TERM LIABILITIES 5,854.70 6,391.70 740.00 5,840.00

LONG TERM PROVISIONS 273.00 192.00 6,740.00 27,940.00

37,019.00 29,190.00 31,120.00

CURRENT L IABI LI TIES

SHORT TERM BORROWINGS 9.90 1,615.90 1,930.00 1,220.00

TRADE PAYABLES 1,654.90 1,734.80 1,520.00 1,480.00

OTHER CURRENT LIABILITIES 6,330.00 7,250.00 3,430.00 7,890.00

SHORT TERM PROVISIONS 810.00 920.00 1,160.00 1,310.00

8,810.00 11,530.00 8,050.00 11,920.00

TOTAL 71,980.00 67,660.00 72,260.00 73,630.00

ASSETS

NON-CURRENT ASSETS

FI XED ASSETS

TANGIBLE ASSETS 19,880.00 16,770.00 17,450.00 18,260.00

INTANGIBLE ASSETS 232.00 197.00 111.00 120.00

CAPITA L WORK-IN-PROGRESS 1,404.00 4,304.00 3,070.00 2,250.00

INTANGIBLE ASSETS UNDER

DEVELOPMENT

14.00 14.20 17.00 41.00

GOODWILL (ON CONSOLIDATION) 21,530.00 21,290.00 20,650.00 20,680.00


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NON -CURRENT INVESTMENTS 25,460.00 27,610.00 33,690.00 36,620.00

LONG TERM LOANS AND ADVANCES 14,390.00 15,560.00 14,410.00 13,460.00

OTHER NON-CURRENT ASSETS 32.00 47.00 123.60 275.00

61,420.00 64,510.00 68,880.00 70,650.00

CURRENT ASSETS

Current investments 4,318.00 0.00 0.00 0.00

INVENTORIES 430.00 400.00 380.00 390.00

TRAD E RECEIVABLES 1,380.00 1,240.00 1,250.00 1,240.00

CASH AND BANK BALANCES 3,558.00 431.00 480.00 220.00

SHORT TERM LOANS AND ADVANCES 532.00 662.00 920.00 710.00

OTHER CURRENT ASSETS 328.20 405.90 320.00 390.00

10,550.00 3,140.00 3,380.00 2,980.00

TOTAL 71,980.00 67,660.00 72,260.00 73,630.00



Other income 790.00 470.00 480.00 550.00

Total Revenue 21030.00 19770.00 19240.00 18640.00

EXPENDITURE

Food and Beverages Consumed 1810.00 1760.00 1640.00 1520.00

Employee benefits expense 5310.00 4720.00 4760.00 4710.00

Finance costs 894.60 980.00 1050.00 1110.00


Other expenses 9520.00 8900.00 8300.00 7780.00



Exceptional item - -2280.00 -7370.00 -4320.00 -61.10

Profit before tax 18.80 -5200.00 -2090.00 2290.00

Less : Tax expense

- Current tax 410.00 580.00 520.00 500.00

- Deferred tax 830.00 160.00 250.00 680.00

Profit for the year -820.00 -5900.00 -2760.00 1450.00


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RATIO ANALYSIS

Analysis of working capital (Current assets – Current labilities):

31-Mar-12 31-Mar-13 31-Mar-14 31-Mar-15

Mahindra 4696 5767 7846 6683

Oberoi -1042 -1911 -585 -245

IHCL -8940 -4670 -8390 1740

CURRENT AND CASH RATIO

Current Ratio

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Mahindra Oberoi IHCL

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An accounting measure used to quantify a firm's effectiveness in extending credit and in

collecting debts on that credit. The receivables turnover ratio is an activity ratio

measuring how efficiently a firm uses its assets.

Receivables turnover looks at how fast we collect on our sales or, on average, how

many times each year we clean up or totally collect our accounts receivables. Higher the

debtors turnover ratio better it is. Higher turnover signifies speedy and effective

collection.

Debtors Turnover Ratio = Sales / Average Accounts Receivable

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00


Debtor's Turnover Ratio

31-Mar-15 31-Mar-14 31-Mar-13 31-Mar-12


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A high receivables turnover ratio can imply a variety of things about a company. It may

suggest that a company operates on a cash basis, for example. It may also indicate that

the company’s collection of accounts receivable is efficient, and that the company has a

high proportion of quality customers that pay off their debts quickly.

A high ratio can also suggest that the company has a conservative policy regarding its

extension of credit. This can often be a good thing, as this filters out customers who

may be more likely to take a long time in paying their debts. On the other hand, a

company’s policy may be too conservative if it is too tight in extending credit, which

can drive away potential customers and give business to competitors. In this case, a

company may want to loosen policies to improve business, even though it may reduce

its receivables turnover ratio.

A more widely used ratio is:

Days Sales Outstanding = 365 / Debtors turnover ratio

Receivables collection period is expressed in number of days

399.71

48.8224.89

395.93

47.6923.46

346.96

51.0524.33

329.52

43.8725.03


Days Receivables

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CREDITORS TURNOVER RATIO

A short-term liquidity measure used to quantify the rate at which a company pays off its

suppliers. Accounts payable turnover ratio is calculated by taking the total purchases

made from suppliers and dividing it by the average accounts payable amount during the

same period.

If the turnover ratio is falling from one period to another, this is a sign that the company

is taking longer to pay off its suppliers than it was before. The opposite is true when the

turnover ratio is increasing, which means that the company is paying of suppliers at a

faster rate

Creditors Turnover Ratio = COGS / Average Payables

0.001.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00


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Also called Accounts Payable Ratio

It indicates the speed with which the payments are made to the trade creditors

Days Payables Outstanding = 365 / Creditors Turnover Ratio

Should be higher than Days Sales Outstanding

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00


Days Payables

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INVENTORIES TURNOVER RATIO

Inventory turnover ratios

A ratio showing how many times a company's inventory is sold and replaced over a

period. The days in the period can then be divided by the inventory turnover formula to

calculate the days it takes to sell the inventory on hand or "inventory turnover days."

Inventory Turnover Ratio = COGS / Average Inventory

Inventory turnover is a measure of the number of times inventory is sold or used in a

given time period

High inventory levels are unhealthy because they represent an investment with a rate ofreturn of zero. It also opens the company up to trouble should prices begin to fall

A low turnover is usually a bad sign because products tend to deteriorate as they sit in

a warehouse.

Companies selling perishable items have very high turnover.

For more accurate inventory turnover figures, the average inventory figure, ((beginning

inventory + ending inventory)/2), is used when computing inventory turnover. Average

inventory accounts for any seasonality effects on the ratio.


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Days Sales in Inventory = 365 / Inventory Turnover Ratio

For more accurate inventory turnover figures, the average inventory figure, ((beginninginventory + ending inventory)/2), is used when computing inventory turnover. Average

inventory accounts for any seasonality effects on the ratio

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00


31-Mar-15 31-Mar-14 31-Mar-13 31-Mar-12


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0.00

5.00

10.00

15.00

20.00

25.00


Inventories Days

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FUTURE SCENARIO OF HOSPITALITY SECTOR IN INDIA

The Indian hospitality industry has emerged as one of the key industries driving growth

of the services sector in India contributing about 6.7% to GDP in the year 2014. Tourism

is the demand driver of the industry and Indian hospitality industry has recorded healthy

growth fuelled by robust inflow of foreign tourists owing to the government's decision

(2014 budget) to introduce the electronic visa facility (e-Visa) at nine airports for 180

nations to give a further boost to FTAs in India thereby leading to a substantial increase

in foreign exchange earnings from the hospitality sector in India

The following listed trends in the Industry driving the growth even at a greater pace:

1. Budget Hotels as the next trigger

2. Medical Tourism

3. New avenues of growth

4. Shifting focus to Tier II and Tier III cities

5. Marketing Strategies

6. Emergence of Mixed Land Usage

7. Huge spurt of international brands

8. Innovative operating models

The booming tourism industry has had a cascading effect on the hospitality sector

with an increase in the occupancy ratios and average room rates. In FY14, the

occupancy ratio was around 57%, up 1% from last year. The average room rate

decreased over the last one year by about 3.4% due to supply pressures and the

general slowdown in the economy. The long term outlook for the Indian hospitality

business continues to be positive, both for the business and leisure segments with


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the potential for economic growth, increases in disposable incomes and the

burgeoning middle class.

Government of India increased spend on advertising campaigns (including for the

campaigns 'Incredible India' and 'Athithi Devo Bhava') to reinforce the rich variety

of tourism in India. The new Indian government has stated that tourism will be a

key focus sector.

n the long term, the demand-supply gap in India is very real and that there is

eed for more hotels in most cities. The shortage is especially true within the

udget and the mid-market segment. There is an urgent need for budget and

id-market hotels in the country as travellers look for safe and affordable

ccommodation. Various domestic and international brands have made

ignificant inroads into this space and more are expected to follow as the

otential for this segment of hotels becomes more obvious.

However, the depreciation of the Indian rupee against the dollar is of great conc

almost every industrial and service sector in the Indian economy. Whether it is fotraveller arrivals or domestic tourism, India's tourism industry is experiencing

boom. The rising value of the dollar against the rupee has made quite an impact o

foreign travel plans of many Indian holidaymakers, prompting them to switch to ch

destinations to make their depreciated currency go further. As a result, do

destinations like Goa and Agra are witnessing increasing interest. Anticipati

inbound travel upswing during the winter season, tourism stakeholders nationwid

excited about the prospects of a robust tourism revival.

https://www.equitymaster.com/detail.asp?date=08/04/2009&story=1&title=FMCG-The-power-of-advertisinghttps://www.equitymaster.com/detail.asp?date=08/04/2009&story=1&title=FMCG-The-power-of-advertising


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Safety and security issues must be understood with the context of tourism. In

addition, safety has become a more prominent concern for tourists. Concerns about

women’s safety remains of paramount importance. Safety and security are vital to

providing high quality tourism. Hence, to promote tourism there should be sound

law and order to assure tourists that they are safe.

Documents

Management Accounting_Working Capital in Hotel Industry.pdf