Chairman’s Statement 2019-20
I am happy to welcome you all in the 31st AGM of the Company. I trust you have since received the 31st Annual Report on the business and operations of the company alongwith Audited Accounts for the financial year ended 31st March, 2020 and with your permission I shall take them as read. Your company has continued to play its role as catalyst for investment in tourism sector. I have pleasure in sharing with you some of the highlights of your Company’s performance in the backdrop of prevailing economic environment and future outlook for tourism sector impacted by COVID-19.
India, despite subdued global economy, emerged as one of the fastest growing major economy in the world during the past 5 years. India, driven by consumption and investment demand, registered GDP growth of over 7% for four years in succession upto 2018-19. However during 2019-20, the Indian economy registered somewhat slower growth to 4.8% as some drivers of growth, notably investment and exports, slowed down. The Government of India has introduced several programmes over the past years, including ones to augment the ease of doing business, encourage digitalization, reduce skill insufficiencies, foster entrepreneurship and boost urban development. Furthermore, other institutional reforms such as the Goods and Services Tax (GST), the four Labour codes and the Arbitration and Conciliation Act, are significant contributors to the country's economic growth going forward. The acceleration of investment friendly policies, structural reforms and low commodity prices has provided a strong impetus for growth. India, backed by its strong democracy and partnerships, is expected to be among the top four economic powers of the world by 2023.
Presently economies across the world have been adversely impacted on account of COVID-19 outbreak which has been declared a world health emergency by The World Health Organization (WHO) in January, 2020. Various Governments have taken measures viz. restrictions on travel, business activity and individual movement etc. to curtail the rapid spread of virus, to ensure safety of the residents and continuity of businesses. The pandemic is having an adverse impact on global economic growth with possible de-growth of 3.0% in CY2020 (as per IMF), if current conditions persist. Further WTO has forecasted that global trade could fall by 13% to 32%, depending on the depth and extent of the global economic downturn. The Indian tourism sector is likely to suffer to the tune of Rs.5 lakh crore besides loss of direct jobs to about 20 million.
TFCI has been acknowledged as the major contributor for growth of tourism infrastructure particularly accommodation infrastructure in the past 30 years. The assistance provided by TFCI has contributed the creation of 51516 hotel rooms in the country representing almost equal to 30% of the room capacity as on date. With the financial assistance provided by TFCI, the tourism related projects have provided direct employment to about 95733 persons. The assistance provided to more than 910 projects by TFCI has also led to catalysing investments to the tune of Rs.31143 Crore in the tourism and other sectors.
During 2019-20, your Company adopted a cautious approach in sanctioning and disbursing loans due to the challenging and subdued business environment to avoid slippages and stressed assets. TFCI has major exposure in financing of tourism projects particularly hotels in 5-star and 3-star segments thereby having extra sectoral risk. In order to contain the sectoral risk, TFCI proposes to extend financial support in other related sectors for short/medium term without compromising its focus on tourism. During the year ended March 31, 2020, the income from operations increased to Rs.262.95 crore as against Rs.229.95 crore during the previous year. The Profit before Provisions and Taxes increased to Rs.121.45 crore as against Rs.113.64 crore on the back of increased in loan book by around 7% and improvement in Return on Advances from 11.8% p.a. to 12.75% p.a. However, the Profit after Tax declined marginally to Rs.81.02 crore despite making additional provision of Rs.24 crore to contain the level of net NPAs to 1.29% of the total assets which is one of the lowest as compared to peer group.
The market uncertainties have increased manifold particularly after the onset of Covid 19 as the tourism sector has been hit severely. The uncertainties associated with the opening of economies are yet to be resolved. In view of the heightened risks, your Company has made adequate provisions to withstand any market eventuality. The gross NPAs of the company have been contained at 1.99% of the total assets (previous year 4.17%) whereas net NPAs are only 1.29% of the total assets as against that of 2.28% at the end of previous year. As these accounts are fully secured, your Company is confident of realising the major portion of the outstanding NPAs. The company is conscious of its obligations to various stakeholders including the lenders, the investors, the staff and intends to capitalise on the opportunities that may arise in future. Accordingly, the Board of Directors, with a view to conserve the liquidity in difficult and uncertain environment decided to skip payment of dividend, in line with the directions by RBI to the banks.
Post Covid-19, the Board of Directors, has approved a new Business Plan for your Company, emphasizing on diversification into other related sectors for growth. TFCI will be looking at various financing options for the MSME sector, acquisition financing, structure financing and also to pursue activities to enhance the fee based income. The Company intends to grow its balance sheet size by aggressively pursuing the emerging opportunities which would enable us to leverage its capital and thereby improve return on equity.
COVID-19 outbreak has adversely impacted hospitality industry worldwide and has the potential to change many aspects of hospitality industry. In case there is a steady recovery from COVID-19 outbreak or a vaccine is developed during the year, the occupancy levels of hotel industry is expected to recover to pre-COVID levels within six to eight months. Travel is likely to return first to domestic markets with staycations followed by MICE segment (Business centers/ smaller meetings) particularly in business cities, then to a country’s nearest neighbours before expanding across regions, and then finally across continents to long-haul international destinations. Given the uncertainties around air travel and the discretionary nature of leisure demand, fly-to destinations are expected to take a longer time to recover as compared to drive-to destinations. Markets and countries that have a significant base of domestic demand such as China, India etc are expected to start recovering first. Younger travellers in the 18-35 years age group, are expected to be among the first to begin travelling again. Hotels are likely to witness the emergence of a newer customer, whose daily behaviour and thinking will differ from what it was before the COVID-19 outbreak. The hospitality, travel and tourism industry will have to adapt to sweeping changes in customer behaviour and buying patterns which would be met through personalised delivery of low-touch services, shift towards curated minimalism, niche travel experiences, digital access control systems & guest room automation, digital display systems etc.
Overall the hotel industry is likely to re-engineer their operating model to this new normal of social distancing. Branded hotels are expected to witness a faster recovery in comparison to standalone hotel properties due to their marketing & operating efficiencies.
Your Company constantly monitors its resource base and taps the appropriate opportunity to minimize the weighted average cost of funds. During the year, your Company met its fund requirements for disbursement as well as repayment/redemption of borrowings out of internal accruals and by way of additional loans from banks on short term basis. TFCI has tied up with various banks for financial assistance to meet its future requirement of resources. Further, your Company proposes to raise funds through issue of long term bonds/additional bank borrowing depending upon the interest rate scenario in the market. Your Company is confident of meeting the funds requirements by raising resources at competitive rates.
Finally, I express my sincere gratitude to Reserve Bank of India, Securities Exchange Board of India, other Financial Institutions and Banks for their support and guidance during the year and look forward to their continued support in future too. I am also grateful to my entire colleague on the Board, the Internal, Statutory Auditors and Secretarial Auditors for their valuable input, guidance and wise counsel.
Last but not the least, the Board of Directors appreciates the contribution made by the employees, who have enabled the company to achieve satisfactory performance till date. Most importantly, on behalf the Board of Directors, I gratefully acknowledge the support, patronage and encouragement given to us by you all and the investors, in all these years.
|August 17, 2020|