Annual Report 2014–2015 Corporate Information Board of Directors A K Nanda Chairman Cyrus J Guzder Vineet Nayyar Rohit Khattar Sridar Iyengar Sanjeev Aga V S Parthasarathy Radhika Shastry Kavinder Singh Managing Director & CEO (w.e.f. November 3, 2014) S Krishnan Chief Financial O!cer & Executive Director (w.e.f. January 22, 2015) Head Legal & Company Secretary Dinesh Shetty Auditors Deloitte Haskins & Sells Chartered Accountants ASV N Ramna Tower 52, Venkatnarayana Road T. Nagar, Chennai - 600 017 Bankers YES Bank Limited HDFC Bank Limited Registered O!ce Mahindra Towers, 2nd Floor, No.17/18, Patullos Road, Chennai – 600 002. Tamil Nadu, India T: +91 44 3988 1000 F: +91 44 3027 7778 E:[email protected] w: www.clubmahindra.com Registrar and Share Transfer Agents CIN: L55101TN1996PLC036595 Karvy Computershare Private Limited Karvy Selenium, Tower B, Plot 31-32, Corporate O!ce Gachibowli, Financial District, Mahindra Towers, 1st Floor Nanakramguda, ‘A’ Wing, Dr. G M Bhosale Marg, Hyderabad - 500 032 P.K. Kurne Chowk, Worli, Ph : 040 6716 2222 Fax : 040 2300 1153 Mumbai-400 018 Toll free no : 1800 345 4001 T: +91 22 3368 4722 F: +91 22 3368 4721 E-mail: [email protected] 1 Mahindra Holidays & Resorts India Limited Contents Statutory Reports Directors’ Report ..................................................................................................................................................................................................................... 3 Management Discussion and Analysis ......................................................................................................................................................................... 31 Corporate Governance Report ........................................................................................................................................................................................ 41 Financial Section Independent Auditors’ Report on Standalone Financial Statements............................................................................................................. 58 Standalone Financial Statements.................................................................................................................................................................................... 62 Independent Auditors’ Report on Consolidated Financial Statements ........................................................................................................ 97 Consolidated Financial Statements ............................................................................................................................................................................... 101 Financial Highlights for Last 5 Years ............................................................................................................................................................................ 136 2 Annual Report 2014–2015 Directors’ Report Directors’ Report to the Shareholders Your Directors are pleased to present their Nineteenth Report together with the audited accounts of your Company for the year ended March 31, 2015. 1. Operations / State of the Company’s A#airs During 2014-15, your Company performed creditably in a challenging macroeconomic environment. It added around 12,800 new members to its vacation ownership business, taking the total membership to around one lakh eighty three thousand at the end of the year. The new member addition was marginally higher as compared to the previous year, and reflects successful execution of Company’s strategy to focus on quality ‘pull’ leads from referrals and digital channels. During the year, the pace of room inventory expansion was commendable. It added another 409 units to its inventory, taking the total room inventory to 2,816 units at the end of the year. In another important development, your Company through its subsidiary Covington S.a.r.l, Luxembourg, acquired 23.32 per cent equity stake of Holiday Club Resorts Oy, Finland, Europe’s leading vacation ownership company with around 50,000 members and 30 resorts — of which 22 are in Finland, 2 in Sweden and 6 in Spain. Your Company also has a right to increase its ownership within a period of two years. This investment allows your Company to o*er member exchange opportunities and opens up growth opportunities in Europe and other international destinations. Your Company’s total income (including other income) grew marginally from `79,893 lakh in 2013-14 to `80,756 lakh in 2014- 15. Profit after taxes (PAT) declined from `9,453 lakh in 2013-14 to `7,902 lakh in 2014-15 mainly due to increase in depreciation charge by `2,738 lakh, primarily due to change in useful life of the assets, and an exceptional item of `2,188 lakh (pre-tax) written o* consequent to adjustments relating to past periods. Diluted earnings per share (EPS) was `8.98 in 2014-15, down from `10.75 in the previous year. Your Company’s consolidated total income (including other income) during 2014-15 was `82,964 lakh. The consolidated profit after taxes (PAT) was `8,122 lakh and the diluted EPS was `9.23. There are no audit qualifications in the standalone or in the consolidated financial statements by the statutory auditors for the year under review. 2. Financial Highlights (Standalone) (` Lakh) 2015 2014 Income: Income from sale of Vacation Ownership and other services 79,485 77,752 Other Income 1,271 2,141 Total Income 80,756 79,893 Expenditure : Less: Employee Cost & other expenses (61,506) (61,851) Profit before Depreciation, Interest and Taxation 19,250 18,042 Less: Depreciation (6,541) (3,803) Interest (25) (97) Profit for the year before Exceptional Item and Tax 12,684 14,142 Less: Exceptional Item (pre-tax) (2,188) - Profit for the year before Tax 10,496 14,142 Less: Provision for Tax – Current Tax (1,920) (2,910) – Deferred tax (net) (674) (1,779) Net Profit for the year after tax 7,902 9,453 Balance brought forward from earlier years 37,688 33,335 Less : Adjustment on Amalgamation of Bell Tower Resorts Private Limited (BTRPL) (4,560) - Less : Loss of BTRPL for the year 2013-14 (870) - Less : Depreciation adjustment consequent to transition to Schedule II of the Companies Act, 2013 net of deferred tax of `528 lakh (1,026) - 39,134 42,788 Appropriations: General Reserve (790) (945) Proposed Dividend on Equity Shares (3,551) (3,551) Income Tax on Proposed Dividend (723) (604) Surplus carried to Balance Sheet 34,070 37,688 3 Mahindra Holidays & Resorts India Limited 3. Dividend and Reserve Consequent to the above, BTRPL ceased to be subsidiary of the Company and all the assets and liabilities of BTRPL have Your Directors are pleased to recommend a dividend of `4/- been transferred to and vested in the Company pursuant to the per equity share of face value `10 each for the financial year Scheme of Amalgamation and Arrangement (“the Scheme”) ended March 31, 2015. The dividend, if approved at the ensuing with e*ect from April 1, 2013 (“the Appointed Date”). There was Annual General Meeting, will be paid to the shareholders whose no allotment of shares to the BTRPL equity shareholders since names appear on the register of members of the Company the BTRPL was a wholly owned subsidiary of the Company. as on the Book Closure Date. The equity dividend outgo for The amalgamation has been accounted under the ‘pooling of 2014-15, inclusive of tax on distributed profits would absorb a interest method’ referred in Accounting Standard 14 and the sum of `4,274 lakh (as compared to `4,155 lakh comprising the assets and liabilities transferred have been recorded at their dividend of `4/- per equity share paid for the previous year). book values as on the Appointed Date. Further, di*erence of ` The Board of Directors proposes to transfer `790 lakh to the 3,061 lakh between value of assets and liabilities acquired at their book value at the Appointed Date as reduced by carrying General Reserve representing around 10 per cent of the profit value of investment in the books of the Company was adjusted for the year. The balance is proposed to be retained in the in the “Amalgamation and Reserve Account” and the same was Profit & Loss Account. transferred to “Securities Premium Account” on the Appointed 4. Share Capital Date as per the approved Scheme. Further, the loss of `870 The paid up equity share capital as on March 31, 2015 was lakh of BTRPL for the year ended March 31, 2014 has been `88.78 crore. During the year under review, your Company did adjusted against the surplus in the Statement of Profit and Loss not issue shares with di*erential voting rights / sweat equity at the beginning of the year. except fresh grant issued under the Company’s Employee B) Competent Hotels Private Limited, Divine Stock Option Scheme 2014 discussed later in this report. Heritage Hotels Private Limited and Holiday Details of Directors’ shareholding as on March 31, 2015, are on Hills Resorts Private Limited mentioned in the Corporate Governance Report, which forms During the year under review, the Board approved the Scheme a part of this Annual Report. of Amalgamation and Arrangement (“the Scheme”) for merger 5. Institutional Placement Programme of Competent Hotels Private Limited, Divine Heritage Hotels Private Limited and Holiday on Hills Resorts Private Limited, (IPP) wholly owned subsidiaries (collectively referred as “Subsidiary During 2013-14, your Company had successfully carried out Companies”) of the Company with the Company. These an Institutional Placement Programme (IPP) and allotted the Subsidiary