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)

Section B

Managerial Accounting 1

Group 10

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

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 companys short term financial health, we define working
capital ratio as Current Assets/Current Liabilities. 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-term
maturing debt and upcoming operational expenses. It involves managing inventories,
accounts receivable, payable and cash.
If a companys 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.

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 main
advantages 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 healthy
working 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

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. This
industry 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

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 is

required 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 companys 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 companys ability to pay off its short term debt and obligations through ready
available cash. Range of ratio should be around 0.5 1
3. Debtors 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/Debtors 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
companys 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

Average payment period (365/Creditors 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 a
measure of how long a companys cash remains tied up in inventories and accounts
receivable.

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 Companys flagship product in the vacation ownership
business, which entitles its members a weeks 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.

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

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

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

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

27,139.23

26,111.51

22,443.26

19,731.15

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

1,415.02

1,460.75

1,756.89

823.22

EQUITY AND LIABILITIES

Shareholders Funds

MINORITY INTEREST
Non-Current liabilities

Current liabilities

Total
ASSETS
Non-current assets
Fixed Assets

Non-current investments

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

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

Current assets

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

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

Profit before tax

1049.65

1414.20

1588.52

1455.16

- 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

EXPENDITURE

Less : Tax expense

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 Groups 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.

10

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 Companys 55-acre beach front site at Goa has been received. Government and
environmental 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.

11

FINANCIAL STATEMENTS OBEROI

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

31-Mar-15

31-Mar-14

31-Mar-13

31-Mar-12

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

777.04

586.73

547.76

411.90

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

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

37,191.22

37,042.09

39,268.19

37,071.45

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

EQUITY AND LIABILITIES

SHAREHOLDERS FUNDS

MINORITY INTEREST
NON-CURRENT LIABILITIES

CURRENT LIABILITIES

TOTAL
ASSETS
NON-CURRENT ASSETS
FIXED ASSETS

12

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

106.98

116.90

CURRENT ASSETS

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

37,191.22

37,042.09

39,268.19

37,071.45

TOTAL

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

2014-15

2013-14

2012-13

2011-12

Revenue from operations

16682.72

15465.72

14684.77

14071.82

Other income

289.08

312.50

360.89

420.40

Total Revenue

16971.80

15778.22

15045.66

14492.22

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

Depreciation and Amortization expense

1678.07

1349.22

1411.35

1297.57

Other expenses

6906.36

6146.02

6040.99

5413.73

Total Expenditure

15521.25

14006.87

14038.10

12915.49

Profit before exceptional item and tax

1450.55

1771.35

1007.56

1576.73

118.44

-150.66

111.46

1450.55

1824.75

739.94

1688.19

- 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

EXPENDITURE

Exceptional item Profit before tax

Less : Tax expense

13

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, the
company 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.

14

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 in
2014. 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.

15

 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

16

FINANCIAL STATEMENTS OF IHCL

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

31-Mar-15

31-Mar-14

31-Mar-13

31-Mar-12

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

EQUITY AND LIABILITIES

SHAREHOLDERS FUNDS

MINORITY INTEREST
20,390.00

NON-CURRENT LIABILITIES
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

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

71,980.00

67,660.00

72,260.00

73,630.00

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

CURRENT LIABILITIES

TOTAL
ASSETS
NON-CURRENT ASSETS
FIXED ASSETS

17

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 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

71,980.00

67,660.00

72,260.00

73,630.00

CURRENT ASSETS

TOTAL

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

Revenue from operations

20240.00

19290.00

18750.00

18080.00

Other income

790.00

470.00

480.00

550.00

Total Revenue

21030.00

19770.00

19240.00

18640.00

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

Depreciation and Amortization expense

1170.00

1220.00

1250.00

1130.00

Other expenses

9520.00

8900.00

8300.00

7780.00

Total Expenditure

18730.00

17610.00

17010.00

16280.00

Profit before exceptional item and tax

2300.00

2160.00

2230.00

2360.00

Exceptional item -

-2280.00

-7370.00

-4320.00

-61.10

Profit before tax

18.80

-5200.00

-2090.00

2290.00

- 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

EXPENDITURE

Less : Tax expense

18

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
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Mahindra
31-Mar-15

19

Oberoi
31-Mar-14

31-Mar-13

IHCL
31-Mar-12

CASH RATIO

Cash Ratio
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Mahindra
31-Mar-15

Oberoi
31-Mar-14

31-Mar-13

IHCL
31-Mar-12

Liquidity ratios are a class of financial metrics that is used to determine a company's
ability to pay off its short-terms debts obligations. Generally, the higher the value of the
ratio, the larger the margin of safety that the company possesses to cover short-term
debts.
The current ratio is a liquidity ratio that measures a company's ability to pay short-term
and long-term obligations. To gauge this ability, the current ratio considers the total
assets of a company (both liquid and illiquid) relative to that companys total liabilities
The ratio of a company's total cash and cash equivalents to its current liabilities is called
cash ratio. The cash ratio is most commonly used as a measure of company liquidity. It
can therefore determine if, and how quickly, the company can repay its short-term debt.
A strong cash ratio is useful to creditors when deciding how much debt, if any, they
would be willing to extend to the asking party.

20

Debtor's Turnover Ratio

18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
Mahindra
31-Mar-15

Oberoi
31-Mar-14

31-Mar-13

IHCL
31-Mar-12

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

21

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 companys 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
companys 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
Days Receivables
31-Mar-15

31-Mar-14

31-Mar-13

31-Mar-12

399.71395.93
346.96
329.52

48.8247.6951.0543.87

Mahindra

22

Oberoi

24.8923.4624.3325.03

IHCL

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
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Mahindra
31-Mar-15

23

Oberoi
31-Mar-14

31-Mar-13

IHCL
31-Mar-12

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

Days Payables
100.00
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
Mahindra
31-Mar-15

24

Oberoi
31-Mar-14

31-Mar-13

IHCL
31-Mar-12

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 of
return 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.

25

100.00
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
Mahindra
31-Mar-15

Oberoi
31-Mar-14

31-Mar-13

IHCL
31-Mar-12

Days Sales in Inventory = 365 / Inventory Turnover Ratio

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

26

Inventories Days
25.00
20.00
15.00
10.00
5.00
0.00
Mahindra
31-Mar-15

27

Oberoi
31-Mar-14

31-Mar-13

IHCL
31-Mar-12

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

28

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.
In the long term, the demand-supply gap in India is very real and that there is
need for more hotels in most cities. The shortage is especially true within the
budget and the mid-market segment. There is an urgent need for budget and
mid-market hotels in the country as travellers look for safe and affordable
accommodation. Various domestic and international brands have made
significant inroads into this space and more are expected to follow as the
potential for this segment of hotels becomes more obvious.
However, the depreciation of the Indian rupee against the dollar is of great concern to
almost every industrial and service sector in the Indian economy. Whether it is foreign
traveller arrivals or domestic tourism, India's tourism industry is experiencing a real
boom. The rising value of the dollar against the rupee has made quite an impact on the
foreign travel plans of many Indian holidaymakers, prompting them to switch to cheaper
destinations to make their depreciated currency go further. As a result, domestic
destinations like Goa and Agra are witnessing increasing interest. Anticipating an
inbound travel upswing during the winter season, tourism stakeholders nationwide are
excited about the prospects of a robust tourism revival.

29

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
womens 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.

30