Parth

SUMMER TRAINING PROG. PRESENTATION

ON Project Finance: Hospitality Industry

Presented By:Parth Sharma

MBA(B&F)3rd Semester

CONTENTS Project finance meaning Company profile Industry overviewObjectivesResearch methodologyData analysisObservationsRecommendation Conclusion

Project Finance: MeaningThe financing of long-term infrastructure,

industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cashflow generated by the project.

Company Profile SREI Infrastructure Finance Limited 24-years-old

Kolkata-based NBFC which is engaged in leasing and hire-purchase/hypothecation financing of heavy construction equipment and financing of infrastructure related projects. Pursuant to forming a 50:50 joint venture (JV) with BNP Paribas Lease Group (BPLG) – a 100% subsidiary of BNP Paribas, SIFL divested major part of its equipment financing and leasing business alongwith the assets & liabilities as on January 1, 2008, in the JV company – Srei Equipment Finance Pvt. Ltd. (SEFPL).

The promoters, Mr Hemant Kanoria (CMD) and his brother Mr Sunil Kanoria (Vice Chairman) have over three decades of business experience in the financial sector.

Indian Hospitality Sector Overview India, a country blessed with diversity, both in

terms of culture and geography, India has always been a fascinating nation to tourist. Owing to its diversity it attracts tourists from all over the world.

The depreciation in INR, Outbound travels are now become far more expensive which will give boast to Domestic and Inbound travel.

As per WTTC, India ranks 11th in the Asia Pacific region and 65th in World Travel and Tourism Competiveness Index, 2013 compare to 68th in 2011.

Continued… The total contribution of T&T to GDP, in 2012, was `

6.385.1 billion (6.6% of GDP) and is forecast to rise by 7.9% p.a. from 2013-2023 to `14,722.3 billion.

Travel & Tourism directly and indirectly supported 39,512,000 jobs (7.7% of total employment). This is expected to rise by 2.1% p.a. to 48,592,000 jobs (8.0% of total employment) in 2013.

As per the World Travel & Tourism Council, the tourism industry in India is likely to generate US $121.4 bn of economic activity by 2015, and the hospitality sector has the potential to earn US $24 bn in foreign exchange by 2015. ** Data source: WTTC Reports, HVS Report etc.

Objectives To study and analyzing the hospitality sector of the

country as a whole through reports issued by various firms such as HVS consultancy firm, tourism & hospitality reports published during the year, newspapers, journals etc..

Analyzing the ‘financials’ of leading ‘Hospitality Groups’ in India so, that an opinion can be form on the governance of hotel industry in India.

Analyzing the Delhi-NCR hotel sector as a prime responsibility so, that an opinion can be framed whether or not the SREI should finance the hotel projects that are coming in their way.

Research Methodology

Nature of Research:A. DescriptiveB. Explorative• My Research was descriptive in nature, with secondary

data as a main source for conducting my job during internship.

Secondary Data: It consists of information that already exists somewhere and has been collected for some specific purpose in the study. The secondary data for this study is collected from various sources like, Books, Website, Newspaper, Financial Magazine (weekly, business world etc).

ANALYSIS & INTERPRETATION

Five parameters for hotel analysisSupply:Demand  Occupancy Rate.Average Daily Rate (ADR)Revenue per available room (RevPAR)

Indian Hotels Company Ltd.(Taj group) Incorporated in 1903, IHCL is promoted by the Tata

Sons Limited. It has long-standing operations spanning over 100 years and operates the largest chain of hotels in South Asia. IHCL, its subsidiaries and associates are widely recognised under the umbrella brand name ‘Taj Hotels Resorts and Palaces’, which has 119 hotels with a room inventory of 14,423 rooms as on May 31, 2013.

IHCL has presence across luxury, upper upscale, upscale and value segments of the market through its various brands i.e. Taj, Vivanta, Gateway and Ginger respectively. The group also has presence in air catering, spas, wildlife lodges and service apartments.

Taj group analysis cont… IHCL’s occupancy levels for FY13 dropped by 2% and

stood at 63% due to oversupply of room inventory in the domestic market coupled with challenging economic environment.

The overall room supply for Indian market in FY13 increased by 24% while the room demand grew by 21%.

The company has seen the satisfactory RevPAR of Rs. 6000 as compared to the industry’s overall RevPAR of Rs. 3625.

Company has enjoyed amazing ARR of Rs. 9,503. IHCL relatively better placed due to strong brand and

diversified presence.** Data source: WTTC Reports, HVS Report etc.

Asian Hotels (North) Ltd. (Hyatt Regency) Asian Hotel (North) Limited (AHNL) is engaged in

the business of operating a hotel property under the brand of ‘Hyatt Regency’ in New Delhi since 1983. AHNL was promoted by the Gupta, Jatia and Saraf families in 1980 and the company started operations with the commencement of Hyatt Regency hotel in Delhi in 1983. Currently, the promoter shareholding is with the Jatia family only.

AHNL operates Hyatt Regency, New Delhi, a five-star hotel, with 520 rooms and five restaurants located at Bhikaji Cama Place, New Delhi.

Hyatt Regency Analysis Cont…AHNL’s occupancy levels for FY13 stood

at the rate of 68% as compared to that of the industry’s rate around 58% which can be considered fine.

Average Room Rate (ARR) of “Hyatt Regency” dropped by 8% as compared to the last year’s ARR. The ARR stood at Rs. 8253 which is outstanding according to the industry norms with industry’s overall ARR of Rs. 4214.

** Data source: WTTC Reports, HVS Report etc.

Delhi-NCR Synopsis of Hospitality Sector The NCR is fast becoming a force to reckon with. Around 32,000 rooms are available in Delhi because of which

five-star tariff of up to Rs 25,000 a night during peak season will fall by almost half in the future, which will ensure that foreigners no longer flock to Bangkok, Singapore or Hong Kong as they are cheaper holiday destinations than the Capital.

Delhi NCR which includes Gurgaon, Noida, Greater Noida, Manesar etc. has some amazing future as far as hotel industry is concerned although currently there is some pressure on the whole sector but in future it will boom according to the indicators. Also in this study AGRA has also been added as it is one of the most prime places in the northern region of India and most of the tourists visits this place via Delhi-Haryana-UP etc.

Delhi-NCR Analysis Delhi: Almost all hotels located in Delhi have witnessed a decline

in RevPAR and this trend is likely to continue in the immediate short term. Overall market demand growth actually grew by 4.7% in 2012/13. Delhi's supply is expected to see an addition of approximately 5,200 new hotel rooms over the next five years that are now under active development. Aerocity is expected to become a unique destination for conventions and events in the country. Our long term outlook for Delhi, therefore, remains bullish.

Gurgaon (Including Manesar): The city, currently features approximately 4,500 hotel rooms and over the last four years has witnessed a CAGR of 31.2% in hotel room supply, resulting in both occupancy and average rate dropping by 5.3% and 10.1%, respectively. Demand in Gurgaon continues to be strong, growing by 12% in 2012/13. Outlook for Gurgaon remains positive.

** Data source: WTTC Reports, HVS Report etc.

Contd… Noida: Hotel market witnessed a steep decline in RevPAR

(27.5%) in 2012/13 over 2011/12, mainly because of two reasons, one increase in supply and the other decline in demand. We expect market wide occupancy and average rate to remain under pressure.

Agra: Agra exhibited the highest increase in RevPAR (10.3%) amongst all the cities supported by growth in both average rate (7.1%) and occupancy (3.0%). The commissioning of the Yamuna Expressway that connects Greater NOIDA to Agra (in August 2012) reducing the travel time by half (from four to two plus hours) has fuelled growth in demand for the city's hotels. Proposed supply is expected to be 88.5% in the upcoming years.

Observations The nationwide RevPAR recorded a 5.2% drop in 2012/13 over the

previous year with the five-star segment registering the maximum decline (8.7%), followed by the three-star segment (4.0%).

The newly introduced two-star category registered the highest RevPAR growth (10.4%).

Fiscal year 2012/13 saw the addition of around 9,000 branded rooms resulting in a nationwide existing supply of 93,479 rooms, an increase of around 11% over the previous year.

NOIDA (including Greater NOIDA) shows the highest increase in supply in 2012/13 over the previous year (58.6%).

Jaipur witnessed the largest growth in supply of branded rooms in 2012/13, followed by Ahmedabad and Chennai.

Mumbai (including Navi Mumbai) maintained its top position with the highest existing supply of branded rooms in the country, followed closely by Delhi.

Recommendations Mumbai International Airport Limited (MIAL) of Mumbai &

Aero-city in Delhi has been remarkably well for the industry as a whole.

What India needs is more such developments in major metropolitan cities.

Another untapped opportunity lies in the country's 7,500 km coastline. Today, the only Indian beach destination to make a mark on the world map is Goa. While there are a few nascent markets developing in Kerala, Andaman & Nicobar Islands, Pondicherry and Daman, they still have a long way to go in attaining the recognition and popularity Goa has achieved.

Studio Rooms Culture: There is huge potential in this segment; and we are hoping that more operators and developers tap this opportunity going forward so that benefit to the whole industry can be grabbed.

Conclusion The tourism industry in India is thriving due to an increase in foreign

tourist arrivals (FTA) and a greater number of Indians travelling to domestic destinations than before. The revenue from domestic tourism is likely to grow by 8.2 per cent in 2014.

The Indian hospitality sector has been growing at a cumulative annual growth rate of 14 per cent every year adding significant amount of foreign exchange to the economy.

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 travelers look for safe and affordable accommodation.

In 2013, the travel and tourism industry contributed Rs 2.17 trillion (US$ 36 billion) or 2 per cent to the country's gross domestic product (GDP). This is expected to rise to Rs 4.35 trillion (US$ 72.17 billion) in 2024.

Contd…Major cities depicted a decline in ARR and

Occupancy, mainly on account of weak business sentiment coupled with curtailment on travel. From Rs.8, 900 in June 2012, ARR decline to Rs.8, 781 in June 2013, with occupancy declining by 2% to 61% during same period.

“Although India has made some headway in the recent past, it still has a long way to go in order to establish itself as a pro-tourism nation.”

** Data source: WTTC Reports, HVS Report etc.