REPORT OF THE BOARD OF DIRECTORS & MANAGEMENT DISCUSSION AND ANALYSIS Your Directors submit their Report for the financial year ended 31st March, 2015. BUSINESS ENVIRONMENT The Indian economy witnessed yet another challenging year with only a marginal pick-up in economic growth. While domestic macro-economic variables improved over the previous year, aided by the decline in global crude oil prices and rate of inflation, the hospitality sector remained subdued. The weakness in the broader economy was manifest in your Company's operating results which continues to be impacted by a weak pricing scenario in the backdrop of a sluggish macro-economic environment both in India and major source markets. FINANCIAL PERFORMANCE During the year under review, your Company earned licence fees of Rs. 320.41 lakhs (previous year Rs. 299.64 lakhs), registering a growth of 7% over last year. However, other income showed a decline mainly due to change in definition of Long Term Capital Assets in relation to Debt Mutual Funds and consequent roll over of investments. Pre and post-tax profits declined to Rs. 400.05 lakhs (previous year Rs.422.66 lakhs) and Rs. 273.38 lakhs (previous year Rs. 327.14 lakhs). In view of the above and the underlying strength of the business, your Directors are pleased to recommend a dividend of Rs. 3.50 per equity share of 7 10/- each for the year ended 31st March, 2015, thereby maintaining last year's dividend and involving a cash outflow of Rs. 159.07 lakhs including Dividend Distribution Tax of Rs. 26.50 lakhs. Your Board further recommends a transfer to General Reserve of Rs. 27.34 lakhs (previous year Rs. 32.71 lakhs) respectively. HOTEL OPERATIONS Your Company's hotel, WelcomHotel Vadodara, licenced to ITC Limited continued to retain its prime position with a revenue market share of 60% and 56% in volume terms to deliver a 7% overall growth in revenue through hotel operations. While there was marginal improvement in occupancy rates, average room rates remained under pressure in the backdrop of the additional room capacity in and around Vadodara, with new properties coming up and also some older properties being rebranded as members of prestigious international chains. The food & beverage segment of your Company's hotel continues to be a major strength. The Peshawari restaurant and the Welcome Cafe Cambay both retained their premium leadership positions in the respective segments. Your Company continued to focus upon 'Lean' and 'Six Sigma' programmes to ensure efficiencies in its business operations as also for improved service delivery to its customers. Your Hotel also targets a continuous reduction in energy and water consumption and enhanced usage of renewable energy sources. Your Company continuous to pursue the arbitration proceedings in a bid to settle the pending lease revision with respect to land on which your hotel is built. Arguments have been concluded before the Arbitrator and the arbitration award is awaited. Your Company has also filed a writ petition in the Gujarat High Court seeking that the Gujarat State Government be directed to take action on your Company's application to have the leasehold land of the Hotel converted to freehold and transferred to your Company as per the existing government policy in this regard. SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES The Company does not have any subsidiary, associate or joint venture. INTERNAL FINANCIAL CONTROLS Your Company's Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by management and approved by the Audit Committee and the Board. The Accounting Policies are reviewed and updated from time to time. These in turn are supported by a set of business specific policies and Standard Operating Procedures (SOPs). Systems, SOPs and controls are reviewed by management and audited by Internal Audit whose findings and recommendations are reviewed by the Audit Committee and tracked through to implementation. Your Company maintains its Books of Account in electronic form. Your Company has in place adequate internal financial controls with reference to the Financial Statements. The Internal Auditors of the Company evaluates the adequacy and efficacy of such internal financial controls. Such controls have been tested during the year and no reportable material weakness in the design or operation was observed. Nonetheless your Company recognises that any internal financial control framework, no matter how well designed, has inherent limitations and accordingly regular audit and review processes ensure that such systems are reinforced on an ongoing basis. RISK MANAGEMENT Your Company continues to focus on a systems-based approach to business risk management. Backed by strong internal control systems, the current Risk Management framework consists of the following key elements: - The Board of your Company has clearly laid down the roles and responsibilities of the Company in relation to risk management covering a range of responsibilities, from the strategic to the operational. These role definitions, inter alia, provide the foundation for your Company's Risk Management Policy that is endorsed by the Board and is aimed at ensuring formulation of appropriate risk management procedures, their effective implementation across your Company and independent monitoring and reporting by Internal Audit. - A combination of policies and evolved procedures brings robustness to the process of ensuring that business risks are effectively addressed. Appropriate structures are in place to proactively monitor and manage the inherent risks in businesses with unique / relatively high risk profiles. - An Independent Internal Auditors carry out risk focused audits enabling identification of areas where risk management process may need to be strengthened. - The Audit Committee of the Board reviews Internal Audit findings and provides strategic guidance on internal controls. The Chief Executive Officer closely monitors the internal control environment within your Company including implementation of the action plans emerging out of internal audit findings. AUDIT AND SYSTEMS Your Company believes that internal control is a necessary concomitant of the principle of governance that freedom of management should be exercised within a framework of appropriate checks and balances. Your Company remains committed to ensuring an effective internal control environment that inter alia provides assurance on orderly and efficient conduct of operations, security of assets, prevention and detection of frauds / errors, accuracy and completeness of accounting records and the timely preparation of reliable financial information. Your Company's independent and robust Internal Audit processes provide assurance on the adequacy and effectiveness of internal controls, compliance with operating systems, internal policies and regulatory requirements. The Internal Audit function consisting of an outsourced professional firm is resourced to deliver the audit assurances meeting high standards. The Audit Committee of your Board met four times during the year. The Terms of Reference of the Audit Committee inter alia included reviewing the adequacy and effectiveness of the internal control environment, monitoring implementation of the action plans emerging out of Internal Audit findings including those relating to strengthening of your Company's risk management systems and discharge of statutory mandates. HUMAN RESOURCE DEVELOPMENT Your Company draws its strength from a highly engaged and motivated workforce whose collective commitment has enabled your Company to maintain its steady performance. Your Company's Human Resource policies and procedures have evolved to stay ahead with the dynamic business environment and have enhanced organisational agility to remain compliant with the changing regulatory requirements. With an undying commitment to render delightful services, your Company's employees consistently work towards delivering flawless performance and are continuing to delight customers. The Company has put in place a Grievance Redressal Procedure and an Internal Complaints Committee to ensure that sexual harassment grievances, if any, are effectively addressed. During the year, four complaints of sexual harassment were reported, which have since been resolved. WHISTLEBLOWER POLICY The Company's Whistleblower Policy encourages Directors and employees to bring to the Company's attention instances of unethical behaviour, actual or suspected, incidents of fraud or violation of the GHL Code of Conduct that could adversely impact the Company's operations, business performance and / or reputation. The Policy provides that the Company investigates such incidents, when reported, in an impartial manner and takes appropriate action to ensure that the requisite standards of professional and ethical conduct are always upheld. It is the Company's Policy to ensure that no employee is victimised or harassed for bringing such incidents to the attention of the Company. The practice of the Whistleblower Policy is overseen by the Audit Committee of the Board and no employee has been denied access to the Committee. The Whistleblower Policy is available o n t h e C o m p a n y ' s w e b s i t e a t <http://www.gujarathotelsltd.in/corporate->governance.html. DEPOSIT Your Company has not accepted any deposits from the public / members under Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 during the year. DIRECTORS Changes in Directors Messrs C K Koshy, Rohit C Mehta and M Narayanan were appointed by the Members with effect from 29th September, 2014 as Independent Directors of the Company under Section l49 of the Companies Act, 2013. Mr Chandrasekhar Subrahmoneyan stepped down as a Non-Executive Director of your Company with effect from 20th January, 2015 in view of his superannuation from ITC Limited. Your Directors would like to record their appreciation of the services rendered by him. Ms Devkanya Roy Choudhury was appointed as an Additional Non-Executive Director of your Company on 19th January, 2015. By virtue of the provisions of Article 130 of the Articles of Association of your Company and Section 161 of the Companies Act, 2013, Ms Choudhury will vacate office at the ensuing Annual General Meeting and being eligible, offers herself for appointment. Your Board recommends her appointment. Retirement by Rotation In accordance with the provisions of Section 152 of the Act and Article 147 of the Articles of Association of the Company, Mr Nakul Anand will retire by rotation at the ensuing Annual General Meeting ('AGM') of the Company and, being eligible, offers himself for re-election. Your Board has recommended his re-election. Number of Board Meetings During the year ended 31st March, 2015, six meetings of the Board were held. Attributes, Qualifications & Independence of Directors and their Appointment The Nominations and Remuneration Committee of the Board approved the criteria for determining qualifications, positive attributes and independence of Directors in terms of the Act and the Rules there under, both in respect of Independent Directors and other Directors as applicable. The criteria interalia requires that Directors shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration or other disciplines related to the Company's business. The Board Diversity Policy of the Company requires the Board to have balance of skills, experience and diversity of perspectives appropriate to the Company. The Articles of Association of the Company provide that the strength of the Board shall not be fewer than three nor more than twelve. Directors are appointed / reappointed with the approval of the members. All Directors, other than Independent Directors, are liable to retire by rotation, unless otherwise approved by the members or provided under any statute. One third of the Directors who are liable to retire by rotation retire every year and are eligible for re-appointment. The Independent Directors of your Company have confirmed that they meet the criteria of independence as prescribed under Section 149(6) of the Act and the Listing Agreement with Stock Exchanges. Remuneration Policy The Company's Remuneration Policy aims at attracting and retaining high caliber talent. The remuneration policy, therefore, is market-led and takes into account the competitive circumstances so as to attract and retain quality talent and leverage performance significantly. The Policy on remuneration of Directors, Key Managerial Personnel and other employees of the Company is provided in the Annexure forming part of this Report. Board Evaluation The Nominations and Remuneration Committee has approved the Policy on Board evaluation, evaluation of Board Committees' functioning and individual Director evaluation. Board performance is assessed against the role and responsibilities of the Board as provided in the Act and the Listing Agreement. The parameters for Board performance evaluation have been derived from the Board's core role of trusteeship to protect and enhance shareholder value as well as fulfil expectations of other stakeholders through strategic supervision of the Company. Evaluation of functioning of Board Committees is based on discussions amongst Committee members and shared by each Committee Chairman with the Board. Individual Directors are evaluated in the context of the role played by each Director as a member of the Board at its meetings, thus assisting the Board in realising its role of strategic supervision 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 the Nominations and Remuneration Committee, the evaluation of individual Directors was carried out anonymously in order to ensure objectivity. The Board was briefed on functioning of Board Committees by the respective Committee Chairman. Key Managerial Personnel During the year Mr Raghunathan Murali and Mr Rohan Singh were appointed as the Chief Executive Officer and the Chief Financial Officer of the Company respectively effective 19th January, 2015. Ms Himanshi Vadhera was appointed as the Company Secretary of your Company effective 30th March 2015. She resigned on 15th June, 2015 and the Company appointed Mr Deepak Kumar Gulati as the Company Secretary effective 22nd July, 2015. AUDIT COMMITTEE & AUDITORS The composition of the Audit Committee is provided under the section 'Board of Directors & Committees' in the Report and Accounts. Statutory Auditors The Auditors, Messrs Talati & Talati, Chartered Accountants, were appointed at the Thirty Second AGM to hold such office for a period of three years. The Board, in terms of Section 139 of the Act, on the recommendation of the Audit Committee, has recommended for the ratification of the Members the appointment of Messrs Talati & Talati, from the conclusion of the ensuing AGM till the conclusion of the Thirty Fifth AGM. The Board, in terms of Section 142 of the Act, on the recommendation of the Audit Committee, has also recommended for the approval of the Members the remuneration of Messrs Talati & Talati, for the financial year 2015-16. Appropriate resolution in respect of the above is appearing in the Notice convening the Thirty Third AGM of the Company. Secretarial Auditors Your Board, during the year, appointed Messrs H M Mehta & Associates, Company Secretaries, to conduct secretarial audit of the Company for the financial year ended 31st March, 2015. The Report of Messrs H M Mehta & Associates, Company Secretaries, in terms of Section 204 of the Act, is provided in the Annexure forming part of this Report. RELATED PARTY TRANSACTIONS During the year ended 31st March, 2015 the Company has not entered into any contract or arrangement with its related parties which is not on arm's length basis. The details in Form AOC-2 of a material transaction entered into by the Company and its related party are provided under Annexure to this Report. Your Company's Policy on Related Party Transactions, as adopted by your Board, can be accessed on the Company's website at <http://www.gujarathotelsltd.in/policies/Policy_on_R> elated_Party_Transactions.pdf DIRECTORS' RESPONSIBILITY STATEMENT As required under Section 134(5) of the Companies Act, 2013, your Directors confirm having: - a) followed in the preparation of the Annual Accounts the applicable Accounting Standards with proper explanation relating to material departures, if any; b) selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of your Company for that period; c) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and 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 such internal financial controls are adequate and were operating effectively; and f) devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. OTHER INFORMATION Compliance with Clause 49 of the Listing Agreement - Corporate Governance The SEBI vide its circular dated 15th September, 2014 had clarified that compliance with revised Clause 49 of the Listing Agreement is not mandatory for your Company effective 1st October, 2014. Hence, certificate from the auditors confirming compliance of conditions of Corporate Governance is not required to be obtained. However, a brief report on Corporate Governance and Shareholder information emanating from Clause 49 of the Listing Agreement are attached as Annexures to this Report as the provisions were applicable for part of the year. Going Concern Status There is no significant or material order passed during the year by any regulator, court or tribunal impacting the going concern status of the Company or its future operations. Extract of Annual Return The information required under Section 134 of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014, is annexed. Particulars of Loans, Guarantees or Investments During the year ended 31 March, 2015 the Company has neither given any loan or guarantee nor has it made any investment under the provisions of Section 186 of the Companies Act, 2013. Particulars relating to Conservation of Energy and Technology Absorption Particulars as required under Section 134 of the Companies Act, 2013 relating to Conservation of Energy and Technology Absorption are provided below:- FOREIGN EXCHANGE EARNINGS AND OUTGO During the financial year 2014-15, foreign exchange earnings of the hotel were Rs. 1,106 lakhs as against (7 Rs. 966 lakhs in the previous year). During the year, your hotel's expenditure in foreign currency amounted to Rs. 7.34 lakhs (previous year Rs. 2.06 lakhs). Employees The total number of employees as on 31 March, 2015 stood at 179. There were no employees who were employed throughout the year and were in receipt of remuneration aggregating 7 Rs. 60 lakhs or more or were employed for part of the year and were in receipt of remuneration aggregating 7 5 lakhs per month or more during the financial year ended 31st March, 2015. The information required under Section 197 (12) of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure forming 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 to the Company and / or its businesses are intended to identify such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto. FUTURE PROSPECTS In view of the positive long-term outlook for the Indian Hotel industry coupled with the prospect of sustained growth in both global and domestic economy, your Company remains committed to its delivery levels of service excellence and customer centricity. It is well positioned to sustain its leadership status in the Vadodara Market. On behalf of the Board Devkanya Roy Choudhury Director Arun Pathak Director Place: New Delhi Date: 22nd July, 2015 |