SUMMER INTERNSHIP PROJECT ON

“THE STUDY OF FINANCIAL STATEMENT OF IHCL AND

LEMON TREE HOTEL

THIS PROJECT IS SUBMITTED TO THE UNIVERSITY OF

MUMBAI

IN PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF DEGREE OF MASTER OF
MANAGEMENT STUDIES (MMS)

BY

AYUSH BANKAR
F- 335

PARLE TILAK VIDYALAYA ASSOCIATION’S

PTVA’S INSTITUTE OF MANAGEMENT
VILE PARLE EAST, MUMBAI-400057
2022-2024
 CERTIFICATE
I, MS.Anjali Paulastye hereby certify that MR. Ayush Arun Bankar, MMS student of
PTVA’s Institute of Management, has completed a project titled “The Study of financial
analysis of LEMON TREE HOTEL AND IHCL ” in the Academic Year 2022-2024. The
work of student is original and the information included in the project is true to the best of my
knowledge.

Ms.Anjali Paulastye Dr. Tejashree Deshmukh

Asst. Professor Director
 DECLARATION

I, Ayush Arun Bankar MMS student of Parle Tilak Vidyalaya Association’s PTVA’s
Institute of Management, hereby declare that I have completed the project titled “The Study
of financial analysis of LEMON TREE HOTEL AND IHCL . During the Academic Year
2022-2024.
The reported work is original and the information/data and the references included in the report
are true to the best of my knowledge. Due credit is extended on the work of
Literature/Secondary Survey by endorsing in the Bibliography as per the prescribed format.
 ACKNOWLEDGEMENT
It’s a matter of great satisfaction and pleasure to present this summer internship project on the
“The Study of financial analysis of LEMON TREE HOTEL AND IHCL”
Firstly, I am extremely grateful for the team working in Infinite Financial Expert for giving me
the opportunity to work as an intern for the company. It was a great learning experience and I
am very much thankful to Mr Sunny Mondal for guiding me and supporting me throughout my
entire internship tenure.

I am also grateful to Dr. Tejashree Deshmukh, the esteemed director of our organization, for
her unwavering support and encouragement throughout the course of my summer internship
project. I am also grateful to my Project Guide Ms. Anjali Paulastye her guidance, discussion
and critical assessment of the project. Also acknowledge him for his valuable suggestions and
support.
PLAGIARISM REPORT
 TABLE OF CONTENT

Sr No. Particulars Page No.

1. Executive Summary 1

2. Introduction 2

3. Industry Analysis 3-5

4. Company Information 6

5. Company undertaken to study 7-8

6. Review of literature 9-12

7. Research of Methodology 13-14

8. Dupont Analysis 15-22

9. Common Size Analysis 22-37

10. Finding and Assumption 38

11. Limitation 39

12. Recommendation 40

13. Suggestion 41

14. Conclusion 42

15. Bibliography 43
 EXECUTIVE SUMMARY
The topic “A study on financial analysis of IHCL and LEMON TREE HOTEL deals with the
analysis of financial performance of IHCL and LEMON TREE HOTEL belonging to tourism
and hospitality industry in India. It is the one of the most important industry of the economy.
Tourism and Hospitality industry, globally, as well as in India, is one of the key sectors of the
economy.

The analysis of the companies is based on the financial statements of the company. Long term
investment decision strongly depends on financial analysis. The study asses the company’s
ability to generate profits, manage debts and handling operation cost, which are essential
factors in determining their sustainability in the industry.

1
 CHAPTER1- INTRODUCTION

A study on financial analysis of lemon tree hotel and Indian hotel

Financial analysis is a critical aspect of any business or investment decision making process. It
involves the assessment of financial statement, performance and financial data to evaluate the
financial health or prospects of a company or investment opportunity. The analysis typically
involves the comparing the financial data of a company to its historical performance, its
industry peers and the boarder market.
The purpose of this financial analysis is to conduct a common size analysis of Indian hotel and
lemon tree hotel financial performance, identify key trends and draw insights that can inform
business decision. The analysis will involve reviewing the company’s financial statement, such
as the income statement, balance sheet and using Dupont analysis.
This study aims to conduct a comparative financial analysis of the companies to gain insights
into their financial performance and competitiveness in the market. By conducting a
comprehensive financial analysis, this study will provide valuable insights into the Tourism
and hospitality industry’s financial dynamics and help investors, analysts, and other
stakeholders make informed decision.
The hospitality industry is a dynamic and integral component of the global economy, playing
a pivotal role in both domestic and international markets. Within this sector, hotel businesses
represent a significant segment, offering diverse services and accommodations to cater to the
varied needs of travelers. In the context of India, two prominent players in the hotel industry
are Lemon Tree Hotels and Indian Hotels Company Limited (IHCL). This study aims to
conduct a comprehensive financial analysis of these two entities, delving into key financial
indicators, performance metrics, and market positioning.
Lemon Tree Hotels has emerged as a prominent player in the Indian hospitality landscape,
known for its focus on mid-priced accommodations and a vibrant brand image. On the other
hand, Indian Hotels Company Limited, commonly known as Taj Hotels, is one of the oldest
and most well-established hotel chains in India, renowned for its luxury offerings and a rich
heritage.
The data is collected for the period of 2-3 years from company’s annual report. Tools that are
used for analysis are ratio analysis and financial statement analysis.

2
 CHAPTER 2- INDUSTRY OVERVIEW
The industry's current expansion has been fuelled by technology. There are currently more
planes and cruise lines running, more hotel rooms being added, and more people traveling. It
is safe to conclude that, at least in terms of growth, the hospitality and tourist industries are in
their prime right now.
● • In 2017, the hospitality and tourism sector made up about $8 trillion of the world
economy. By 2025, it is anticipated to surpass $10 trillion (officially).
● Based on data provided by Statista and released by the World Tourism Organization,
there were roughly 1460 million foreign visitors in 2019. Before beginning to rise again
in 2020 and 2021, the number saw a significant decline. In 2022, there were 962 million
of them. Take a peek at how individuals have traveled abroad over the last few decades
in the image below.

• In the US, the travel industry alone provides 1 in 8 employment.

Additionally, following the severe effects of the recession brought on by the Covid-19
outbreak, travel and tourism have demonstrated a significant recovery, according to the
WTTC annual report. According to the analysis, the travel and tourism industry's
contribution to the global GDP in 2022 was 7.6%, up 22% from 2021 and only 23%
less than in 2019. There were 22 million new employment in 2022, up 7.9% from 2021
and just 11.4% less than in 2019. For easy reference, view the Economic Impact Map
below, which shows a 7.9% gain over 2021 and just a 11.4% decrease over 2019.

3
● With women making up 55% of the worldwide workforce, the hospitality and tourism
business stands out in an almost entirely male-dominated field facing gender bias and the
glass ceiling.
•Over the next ten years, the hospitality sector's employment contribution is anticipated to
increase at a pace of 2.4%. Thus, the hotel sector is expected to continue adding jobs even
while other businesses see layoffs.By2025, space tourism is expected to be a multibillion dollar
industry. Isn't that amazing?
● The value of the hospitality industry rises even more when related industries such as hotels,
restaurants, timeshares, entertainment, and travel are taken into account.
● The hospitality and tourist sectors will expand considerably more in developing nations.
● The biggest hotel corporations in the world now have more investment options thanks to
the relaxation of regulations in nations like South Africa, Brazil, India, and others.
● Therefore, it benefits both job seekers from developing nations like India and those nations
themselves. There will be significant increase during the next ten years.
● Consider the Indian travel sector, as reported by the India Brand Equity Foundation.
● The Hospitality and Tourism industry is being driven to the next level with the help of
technology.
Digital Technology in Tourism is more of a commodity now. From regular use of social media
to the emergence of 4G/5G. WiFi has become a routine thing and most of the travellers would
use travel apps and related online research before finalising travel.

4
 ● Artificial Intelligence and data analytics for better customer service, booking,
behaviour, deals, feedback etc.
● Blockchain in the hospitality and tourism industry- Over $2 billion has been invested
already and is set to change the landscape of the hospitality industry in future.
● Robots and automated hospitality services
● Virtual reality to enhance the experience of customers
● The IBEF report suggests a rapid increase in the overall number of international visitors
as well as medical tourists by 2028.
● This is set to create a lot more job opportunities for the hospitality industry job seekers.
● While developing nations are taking the lead developed nations are not far behind.
● The US is already a market leader as far as the hospitality industry revenue is concerned.
● The travel and tourism industry in the UK is set to grow even amidst the pressure of
Brexit.
● Shrugging off the Brexit pressure, the hospitality industry in the UK is set to grow.
● The tourism industry in the UK is expected to be worth GBP 257.4 bn by 2025. More
details are provided by the website VisitBritain.
● to accommodate the rising growth of the travel industry, the hotel industry is set to
witness unprecedented growth which is one of the key sectors of the hospitality
industry.
● Hospitality is all about service and has a clear overlap with Tourism.
● Jobs in the hospitality and tourism industry covered almost each and every profession.
● Think of it and you will find that this industry has a job available for candidates of all
professions.
● No hospitality industry overview can be complete without a mention of technology,
innovation and creativity.
● The Hospitality and Travel Industry has embraced technology. Customer interests and
expectations drive innovation in the hospitality industry.
● Listed below are some of the exciting innovation in the hospitality and tourism industry.
Some of these are already existing while others are works in progress.
● Robotics in Foodservice
● In-room and In-flight virtual reality experience
● Apple’s Siri and Amazon’s Alexa in hotel rooms
● Workflow management tools in the hospitality and travel industry
● Wearable Technology
● Big Data in the travel industry

5
 CHAPTER 3- Company Information

● Infinite Financial Experts is a subsidiary of Shree Deepraj Insight LLP which focuses on
creating and publishing financial reports related to Equity, Mutual Funds, Bonds, and Other
Financial Instruments.
● Infinite Financial Expert (IFE) hires interns to create these reports by using various
Valuation Models and Financial Modelling.
● IFE helps analyse the fundamentals of the company and start creating an excel which is
already formulated and try to achieve the end goal.
● IFE also analyse the final share price and market price and comment whether the company
is over-valued and under-valued.

Deepraj Insight LLP was incorporated on 15 May 2021.

The company has Two designated Directors
1. Deepa Rajkumar Mondal
2. Mayuri Dharmendra Mehta

6
 CHAPTER 4- COMPANY UNDERTAKEN TO STUDY

According to the Horwath Report, as of June 30, 2017, Lemon Tree Hotels Limited was the
largest hotel chain in India in the mid-priced hotel segment and the third largest overall based
on controlling stake in owned and leased rooms. Our business ranges from the upper-midscale,
midscale, and economic areas of the mid-market sector to the posh segment. With a value-for-
money proposition, we offer exceptional yet unique services.
Under its several brands, including Aurika Hotels & Resorts, Lemon Tree Premier, Lemon
Tree Hotels, Red Fox Hotels, Keys Prima, Keys Select, and Keys Lite, LTHL inaugurated its
first hotel with 49 rooms in May 2004 and today runs ~9,700 rooms in 100 hotels across 64
places, in India and worldwide. LTHL plans to operate around 10,450 rooms in 106 hotels
located in 64 destinations both in India and outside once the existing pipeline is put into service.
In addition to the NCR, Mumbai, Kolkata, Bengaluru, Hyderabad, and Chennai, there are
several other Tier I and II cities in India, including Pune, Ahmedabad, Chandigarh, Jaipur,
Indore, Aurangabad, Udaipur, Vishakhapatnam, Kochi, Ludhiana, Thiruvananthapuram, and
Vijayawada, where Lemon Tree Hotels, which include Keys Hotels, are spread out throughout
the country. The company opened hotels in Bhutan in February 2020 and Dubai in December
2019 as part of its global expansion. Nepal and Bhutan will also see the opening of new hotels
on a global scale.
OUR BRANDS
The group offers seven brands to meet hotel needs across all levels:
1. Aurika Hotels and Resorts Upscale segment
2. Lemon Tree Premier Upper Midscale segment
3. Lemon Tree Hotels Midscale segment
4. Red Fox Hotels Economy segment
5. Keys Prima Upper Midscale segment
6. Keys SelectMidscale segment
7. Keys Lite Economy segment

7
IHCL and its affiliates unite a collection of companies and brands that combine warm Indian
hospitality with top-notch services. These include Vivanta, a chain of modern, upscale hotels
that celebrate joie de vivre; Ginger, a brand that is revolutionizing the lean-luxe segment; amë
Stays & Trails, a charming portfolio of private bungalows and villas set in picturesque locales;
and Taj, the iconic brand for the most discriminating travelers, which was named as the World's
Strongest Hotel Brand and India's Strongest Brand across sectors in the Brand Finance Hotels
50 Report 2022 and India 100 Report 2022, respectively.
In a joint venture with SATS, IHCL also runs TajSATS Air Catering (previously known as
Singapore Airport Terminal Services).[20] IHCL declared in May 2017 that it would
consolidate all of its hotels under the distinct Taj Hotels Palaces Resorts Safaris brand. A single
corporate entity was formed by the combination of the Gateway and Vivanta by Taj brands. In
the summer of 2017, Cyrus Mistry said that several of the most recent expensive acquisitions
made by the group—the Taj Boston, The Pierre in New York, and the Sea Rock Hotel—had
"destroyed the economic value of the company". 2018 saw a reversal of the distinctive brand
decision.

8
 CHAPTER 5- LITERATURE REVIEW
1. A DUPONT ANALYSIS ON SELECTED INDIAN BANKS PERFORMANCE
Rajarajeswari Sanjeevinathan, Dr.S.Revathy, Srinivasan Krishnan ( October 2023)
The health of a nation's banks determines its economic standing. The availability of capital for
banking operations and the efficiency with which it has been used determine a bank's
profitability. Financial analysis is regarded as one of the most trustworthy methods in the
current business climate for assessing the performance of the banking industry. The current
study looks into the financial standing of a few Indian commercial and public sector banks.
Using the DuPont system, it examines the performance from 2018 to 2023. According to this
analysis, HDFC Bank performs significantly better in terms of ROE, NIM, ATO, and NPM.
Out of all banks, Axis Bank and ICICI Bank have superior leverage ratios.

2. DuPont Analysis of Luxury Industry and Market Portfolio : A Comparative Study

Neha Bothra, Saloni Gupta (November 2020)
The return on equity (ROE) ratio is the main metric used to assess financial performance. A
firm's sources of financial performance (ROE) are examined via the DuPont model. When
compared to its competitors, the luxury sector often drives strong market profitability. Is this
sufficient evidence to conclude that the luxury companies' profitability plays a substantial role
in the ROE? The goal of the study was to determine how financial leverage, asset efficiency,
and company profitability affected return on equity (ROE) in both the luxury and non-luxury
industries (LI and NLI). After doing the DuPont analysis, the luxury and non-luxury industries
were compared in the report. The empirical results indicated that a firm's efficiency—measured
by ATR for the dependent variable ROE—contributed the largest beta-coefficient. Comparing
the results, it was discovered that even in the premium sector, they were comparable.
Keywords: ROE, DuPont Model, Luxury Industry, Financial Performance. Classes JEL: E22,
F65, L25, M41.

3. The Use of DuPont Analysis by Market Participant

Mark.T.Soliman(October 2007)
This work adds to the literature in three ways by thoroughly examining the DuPont
components. In terms of projecting future earnings, the information in this accounting signal is
in fact incremental to accounting signals examined in earlier studies, according to the study,
which first adds to the body of knowledge on financial statement analysis. Second, by
analyzing investors' immediate and long-term equity return reactions to these components, it
adds to the body of literature on the stock market's use of accounting information. Finally, by
retesting analysts' prompt and delayed responses through contemporaneous prediction
revisions and future forecast errors, it contributes to the body of work on analysts' processing
of accounting information. The findings, which are consistent for both sets of market
participants, demonstrate the value of the information through correlations between the DuPont

9
components and stock returns as well as modifications to analyst forecasts. On the other hand,
I discover recurring forecast errors and anomalous returns in the future, suggesting that the
information processing is not yet finished. When considered collectively, the analysis shows
that the DuPont components constitute a useful and incremental source of knowledge on a
firm's operational features
4. The art of company financial modelling
Zoran Lukić (December 2017)
The term "financial modelling" in corporate finance refers to a commonly employed method
predictive, explanatory, and descriptive even when they lack mathematical precision. The
primary procedures and ideas for creating financial models of businesses are explained in detail
in this paper. It also lists necessary presumptions and specific statistical characteristics of well-
built models. It also discusses the use of these models to decision assistance, with an example
provided for clarity. Lastly, it covers general traits and issues related to suitable model building
and application
5. Bank Valuation Models
Prof. Chitra Gunshekhar Gounder & Dr. M. Venkateshwarlu (August 2017)
The goal of the bank valuation model's creation was to match the most appropriate valuation
model for banks in order to assist in anticipating both the market value of shares and decisions
particular to individual banks. First, compare the results from the Relative Valuation Model for
Banks with the accuracy and explanatory power of the residual income model value
estimations. When assessing bank shareholder value, empirical data indicates that the residual
income model outperforms the relative valuation approach. The comparison's findings imply
that value estimations for banks are even more trustworthy when derived using the residual
income model. They draw the conclusion that residual income is a suitable value estimate for
banks' shareholder value based on this information. By using correlation and regression
analysis, it was possible to verify that, in every case, there was a positive and substantial
relationship between the market price of shares and the intrinsic value of bank shares as
estimated by the RIV model. This study will be helpful in predicting potential shifts in market
prices. Since the factors affecting private, public, and Indian banks differ, it was found that the
determinants change according on the working and regulatory environment. As a result, the
panel regression model will differ for each situation. Moreover, it was found that public sector
banks in India exhibit a more positive and progressive trend than private sector banks, despite
the latter having more regulatory restrictions. The results of this study will be very helpful to
bankers as they plan and make decisions about creating shareholder value. They will help them
by using appropriate valuation models to estimate values accurately and by adopting
appropriate internal performance measures to monitor the process of creating value on a regular
basis

10
6. Company valuation methods. The most common errors in valuations
Pablo Fernández (August 2004)
The most popular approaches for valuing companies are divided into four major categories
in this paper: cash flow discounting-based methods, mixed methods, income statement-
based methods, and balance sheet-based methods. The approaches based on cash flow
discounting are the ones that are theoretically "correct." Since alternative approaches are
nonetheless widely employed while being theoretically "incorrect," we will touch on them
un passing. Additionally, they provide a real-world example to show how a company's
valuation is determined by adding the values of its many businesses—a process known as
break-up value. They conclude the study with a list of the most frequent mistakes made in
valuations, which the author has found in over a thousand valuations he has accessed while
working as a business consultant or instructor.

7. Financial modelling: Where to go? With an illustration for portfolio management

Jaap Spronk, Winfried Hallerbach (1997)
The development and use of instruments to assist businesses, investors, intermediaries,
governments, and others in their financial-economic decisionmaking, along with the
verification of the underlying assumptions and the assessment of the effectiveness of their
application, is the definition of financial modelling selected by the EURO working group on
financial modelling. This term obviously places a strong emphasis on the choice and its
resolution. The theory of finance, in contrast to financial modelling in our definition, is more
interested in the ways that the decisions and actions of several persons influence the creation
of prices in financial markets. Thus, it should come as no surprise that the basic presumptions
of financial theory are ill-suited to characterize particular human decision difficulties, at best
describing "average individuals" and "average decision situations." According to them, the
purpose of financial modelling is to assist in making individual decisions by considering the
specifics of each situation and, where appropriate, utilizing the findings of financial theory. A
framework for portfolio management serves as an illustration of this approach to financial
modelling.

8. Using DuPont analysis to assess the financial performance of the top 3 JSE listed
companies in the food industry
Mishelle Doorasamy (South Africa) (03 June 2016)

Using Pioneer Foods, Tiger Brands, and RCI—the top three JSE-listed companies—this
study aims to assess the financial performance of the food business from 2013 to 2014. The
DuPont analysis has been used to compute ratios such return on equity (ROE) and return
on assets (ROA) in order to meet the goals of this study.

11
DuPont analysis is a crucial instrument for assessing a company's operational success
(Sheela and Karthikeyan, 2012). For most investors, choosing an investment is a
contentious matter due to the stock market's volatility.
Large-scale financial investments require careful consideration in order to make an
informed choice. Financial statements serve as a barometer for the company's profitability
and long-term viability. Before making any strategic decisions—and especially before
making investment decisions—ratios are a useful tool for quantifying the risk component.
One of the most significant financial ratios, according to reports, is that it gives investors a
more thorough. A performance metric (Demmer, 2015). Using the DuPont system, a
thorough financial study of all three businesses reveals that investing in Tiger Brands would
provide a larger return to shareholders than in Pioneer Foods or RCI.

12
 CHAPTER 6- RESEARCH METHODOLOGY
Objectives
1. Profitability Assessment: To examine net profit margin in relation to total profitability.

2. Asset Utilization Efficiency: To gauge how well assets produce income, assess the Total
Asset Turnover ratio.

3. Financial Leverage Examination: To gain understanding of debt financing and financial

risk, evaluate the Equity Multiplier in DuPont Analysis.

4. ROE Breakdown: To determine operational efficiency or inefficiency, analyze and

dissect ROE into its constituent parts while taking profit margins, asset turnover, and
financial leverage into account.

5. Performance Comparison: To enable fine-grained performance comparisons between

several businesses or industry peers, apply DuPont Analysis on certain ROE components.

Needs:
1. Financial Statements: Verify that the most recent financial statements are accurate.
2. Comprehend the Net Profit Margin, Total Asset Turnover, Equity Multiplier, and their
interplay as the constituents of the DuPont Model.
3. Benchmarking: Utilize benchmark data to compare your performance to that of your
competitors or the industry.
4. Sectoral Dynamics Awareness: Recognize how industry dynamics impact leverage, asset
turnover, and profit margins.
5. Strategic insight: Learn how to modify your approach to better impact financial
performance and ROE components.
6. Examine the financial risk associated with the capital structure of the business and the effect
that changes in debt will have on return on equity.
7. Effective Communication: Make sure stakeholders are aware of the findings in a clear and
useful manner.

13
Research Methodology
As the methodological framework that directs the entire research process, research
methodology offers an organized and systematic approach to inquiry. It contains a great deal
of the core concepts, procedures, and techniques required to organize, carry out, and assess
research projects in order to ensure the reliability and consistency of study results. A clear
definition of the study's goals and purposes serves as the methodology's foundational first step
and guides the overall objectives and specific questions to be addressed. Researchers choose
from a range of research designs, such as experimental and descriptive designs, depending on
the goal of the study.
Sampling techniques are an essential part of methodology that govern the process of selecting
a representative subset from a larger population, hence influencing the study's generalizability.
All methods of collecting data, including surveys, interviews, experiments, and observations,
are compliant with the research objectives and the type of information needed. Determining
the instruments to be used in data collection is part of instrumentation, which guarantees
accuracy.
This study's operational clarity in describing variables and measures enhances its replicability
and consistency. The analysis phase uses strict statistical or qualitative procedures as outlined
in the methodology to guarantee the reliability of the results. The evaluation of validity and
dependability is a crucial component in establishing the accuracy and consistency of the
findings.

● SAMPLE SIZE
The Study contain a company from Tourism and hospitality sector namely Lemon Tree
Hotels Limited and The Indian hotel company limited.

● DATA ANALYSIS
Secondary Data means data which is not collected from original sources. It is collected by
other than primary user. Secondary data helps to save time as there is no time spent on
collection of data.

● DATA COLLECTION
The research is completely on Secondary Data obtained from published Annual Report
which covers Five Years period (2018-19 to 2021-22).

● DATA ANALYSIS
Microsoft Excel tool is used while performing the Analysis.

● PERIOD OF THE STUDY

With the purpose of investigating the changes in performance, the study has covered five
accounting years which starts from 1st April 2017 to 31st March 2022 for study.

14
 CHAPTER 7- ANALYSIS OF FINANCIAL STATEMENT
DuPont analysis
One helpful method for breaking down the various factors that influence return on equity
(ROE) is DuPont analysis. Investors can concentrate on each of the important financial
performance indicators separately to pinpoint strengths and problems thanks to the breakdown
of ROE.
KEY TAKEAWAY

● The DuPont Corporation is credited with popularizing the DuPont analysis framework,
which is used to analyze fundamental performance.
● DuPont analysis is a helpful method for breaking down the various factors that influence
return on equity.
● These kinds of analysis techniques are useful for comparing the operational efficiency of
two similar organizations by an investor.
● DuPont analysis is a tool that managers can use to determine strengths and weaknesses that
require attention.

ROE is primarily driven by three financial metrics:

● Operating efficiency is calculated by dividing net income or profit margin by total sales or
revenue.
● The asset turnover ratio quantifies the asset utilization efficiency.
● Leverage in finance, a quantity determined by the equity multiplier (average assets divided
by average equity)

15
DuPoint Analysis of Lemon Tree Hotel
lemon tree hotel
DuPont Analysis & Comparison
ROE = Profit Margin*Total Assets Turnover*Equity Multiplier
ROE = (Net Income/Net Sales)*(Net Sales/Total Assets)*(Total Assets/Average Shareholders' Equity)
Particulars: lemon
FY 2021-22 Net Income -13,736
Net Sales 41,627
(Note: Amount is in INR in crores)
Total Assets 3,63,503

Average Shareholders' Equity 1,04,787.00

Profit Margin (0.33)

Total Assets Turnover 0.11
Equity Multiplier 3.47

ROE for FY 2021-22 -13.11%

FY 2020-21 Net Income (18,654.17)

Sales 26,497.92
(Note: Amount is in INR in crores)
Total Assets 1,59,864.01

Average Shareholders' Equity 87,028.51

Profit Margin (0.70)

Total Assets Turnover 0.17
Equity Multiplier 1.84

ROE for FY 2020-21 -21.43%

FY 2019-20 Net Income (1,305.45)

Sales 67,522.02
(Note: Amount is in INR in crores)
Total Assets 1,61,623.52

Average Shareholders' Equity 84,900.78

Profit Margin (0.02)

Total Assets Turnover 0.42
Equity Multiplier 1.90

ROE for FY 2019-20 -1.54%

FY 2018-19 Net Income 5,637.88

Sales 55,943.79
(Note: Amount is in INR in crores)
Total Assets 2,77,184.00
Average Shareholders' Equity 84,493.26

Profit Margin 0.10

Total Assets Turnover 0.20
Equity Multiplier 3.28

ROE for FY 2018-19 6.67%

4 Years Avg. ROE -7.35%

16
FY 2021–2022 Analysis:
Net Income: The business experienced a large net loss of INR -13,736 Crores, which suggests
operational difficulties and perhaps financial trouble.
Net Sales: The company managed to achieve INR 41,627 Crores in net sales, indicating a
significant revenue stream, although facing difficult financial circumstances.
Total Assets: Showing a significant asset base, the total assets increased to INR 3,63,503
Crores. The capacity to turn these assets into profits, though, seems limited.
Average Shareholder Equity: At INR 1,04,787 Crores, shareholders' equity indicated the
amount of financial support they were providing.
Profit Margin: The company's negative profit margin (-0.33%) suggests that sales were below
expectations, which begs questions about the effectiveness of its cost control and operating
procedures.
Total Assets Turnover: A low total assets turnover of 0.11 suggests that the business might
not be making the best use of its resources to produce revenue.
Equity Multiplier: A substantial reliance on debt to finance assets is indicated by the high
equity multiplier of 3.47.
FY 2021–2022 ROE: With a negative ROE of 13.11 percent, it appears that stockholders lost
money on their equity investment during this fiscal year.
FY 2020-21:
Net Income: A further noteworthy net loss of INR -18,654.17 crores demonstrates ongoing
financial difficulties.
Net Sales: Despite being less than the previous year, net sales of INR 26,497.92 Crores
nevertheless represent a sizeable revenue base.
Total Assets: With a growth of INR 1,59,864.01 Crores, total assets show that asset investment
has continued.
Average Shareholder Equity: As a result of the financial assistance given by shareholders,
shareholders' equity increased to INR 87,028.51 Crores.
Profit Margin: The corporation may have had difficulty turning a profit from sales, as
indicated by the negative profit margin of -0.70%.
Total Asset Turnover: A total assets turnover of 0.17 denotes a moderate level of asset
utilization efficiency in relation to sales generation.
Equity Multiplier: A moderate reliance on debt to finance assets is indicated by an equity
multiplier of 1.84.
ROE for FY 2020–21: This fiscal year's negative ROE of (21.43%) indicates a large loss for
shareholders.

17
FY 2019-20:
Net Income: Although better than the previous year, a net loss of INR -1,305.45 crores still
indicates financial difficulties.
Net Sales: A significant rise to INR 67,522.02 crores in net sales points to an expansion of the
revenue base.
Total Assets: Due to continuous asset investments, total assets rose to INR 1,61,623.52 Crores.
Average Shareholder Equity: Showing sustained financial support, shareholders' equity rose
to INR 84,900.78 crores.
Profit Margin: The low profit margin (-0.02%) suggests that it may be difficult to turn sales
into profits.
Total Assets Turnover: A total assets turnover of 0.42 indicates better sales generation
efficiency when using assets.
Equity Multiplier: A greater reliance on debt financing is shown by the equity multiplier,
which rose to 1.90.
ROE for FY 2019–20: This fiscal year's negative ROE of (1.54%) implies a slight loss for
owners.
FY 2018-19:
Net Income: INR 5,637.88 crores in positive net income points to a return to profitability.
Net Sales: A significant revenue base is shown by net sales of INR 55,943.79 Crores.
Total Assets: Due to large asset investments, total assets increased to INR 2,77,184.00 Crores.
Average Shareholder Equity: Showing continued financial support, shareholders' equity rose
to INR 84,493.26 crores.
Profit Margin: A company's capacity to turn a profit from sales is shown by a positive profit
margin of 0.10%.
Total Assets Turnover: When assets are used to generate sales, a total assets turnover of 0.20
indicates a moderate level of efficiency.
Equity Multiplier: A greater reliance on debt financing is shown by the equity multiplier,
which rose to 3.28.
ROE for FY 2018–19: This fiscal year's positive ROE of 6.67% indicates a return on equity
investment for shareholders.
The company's overall financial health suffered in FY 2020–21 and FY 2021–22 due to severe
losses. Concerns over operational effectiveness and cost control are raised by the recent
negative profit margins. Although net sales have increased, there is still room for development
in the ability to turn sales into profits. The rising equity multiplier indicates the company's
growing reliance on debt, which calls for careful assessment of the capital structure of the
18
 business. Recent losses for shareholders have highlighted the necessity for strategic actions to
increase profitability and stability of the financial system.

DuPont analysis of IHCL

IHCL
DuPont Analysis & Comparison
ROE = Profit Margin*Total Assets Turnover*Equity Multiplier
ROE = (Net Income/Net Sales)*(Net Sales/Total Assets)*(Total Assets/Average Shareholders' Equity)
Particulars: lemon
FY 2021-22 Net Income 265
(Note: Amount is in INR in Net Sales 3,211
crores) Total Assets 13,090
Average Shareholders' Equity 5,355.35
Profit Margin 0.08
Total Assets Turnover 0.25
Equity Multiplier 2.44
ROE for FY 2021-22 4.95%
FY 2020-21 Net Income 795.63
(Note: Amount is in INR in Sales 1,739.88
crores) Total Assets 11,512.71
Average Shareholders' Equity 4,002.63
Profit Margin 0.46
Total Assets Turnover 0.15
Equity Multiplier 2.88
ROE for FY 2020-21 19.88%
FY 2019-20 Net Income 363.74
(Note: Amount is in INR in Sales 4,595.56
crores) Total Assets 11,518.26
Average Shareholders' Equity 4,352.41
Profit Margin 0.08
Total Assets Turnover 0.40
Equity Multiplier 2.65
ROE for FY 2019-20 8.36%
FY 2018-19 Net Income 296.12
(Note: Amount is in INR in Sales 4,595.38
crores) Total Assets 9,583.76
Average Shareholders' Equity 4,264.55
Profit Margin 0.06
Total Assets Turnover 0.48
Equity Multiplier 2.25
ROE for FY 2018-19 6.94%

4 Years Avg. ROE 10.03%

19
Net Income (265 INR crores): The profit left over after all costs are subtracted from revenue
is known as the net income. Reduced profitability is indicated by a lower net income (795.63
INR crores) in FY 2020–21 than in prior years.
Net Sales (3,211 INR crores): The total amount of money made from the sale of goods or
services is represented by net sales .Improved sales performance is suggested by the notable
increase from the prior year (1,739.88 INR crores in FY 2020–21).
Total Assets (13,090 INR crores): The company's whole resource portfolio is included in its
total assets. Potential business expansion is indicated by a significant rise from the prior year
(11,512.71 INR crores in FY 2020–21).
Average Equity Held by Shareholders (5,355.35 INR crores): This is the average
shareholders' equity worth for the entire fiscal year. For stockholders, an increase from the
prior year (4,002.63 INR crores in FY 2020–21) would be advantageous.
Margin of Profit (0.08): The ratio of net income to net sales is known as the profit margin. A
low profit margin indicates that the business only keeps a tiny percentage of its sales as profit.
Turnover in Total Assets (0.25): It gauges how well the business uses its resources to produce
revenue. A lower turnover rate than in prior years could be a sign of diminished productivity.
Multiplier of Equity (2.44): The way the business uses debt to finance its assets is reflected
in the equity multiplier. A drop from 2.88 in FY 2020–21 to the prior year indicates a lessened
reliance on debt.
Equity Return (ROE - 4.95%): ROE is a measure of a company's capacity to make money
off of the equity owned by shareholders. A drop from FY 2020–21 (19.88%) to the prior year
can suggest decreased profitability in relation to shareholder investment.

FY 2020-21:

Net Income (795.63 INR crores) for FY 2020–21: Improved profitability is shown by a
significant rise from the prior year (363.74 INR crores in FY 2019–20).
Net Sales: 1,739.88 Indian Rupees: A slight rise from the prior year (4,595.56 INR crores in
FY 2019–20) points to a possible rise in pricing or market demand.
Assets totaling 11,512.71 INR crores: A modest rise from FY 2019–20 (11,518.26 INR
crores) could be a sign of cautious corporate expansion.
Equity Held by Average Shareholders (4,002.63 INR crores): A rise from the prior year
(4,352.41 INR crores in FY 2019–20) indicates that shareholder equity is trending upward.
Margin of Profit (0.46): A respectable percentage of income kept as profit is indicated by a
moderate profit margin.
Turnover in Total Assets (0.15): Reduced turnover points to possible inefficiencies in the
way assets are used to produce revenue.

20
Multiplier of Equity (2.88): An larger reliance on debt to finance assets is indicated by a
higher equity multiplier.
Equity Return (ROE - 19.88%): A high ROE indicates that shareholders' equity was used
profitably and efficiently.
FY 2019-20:
Net Income 363.74 crores Indian rupees: Lower profitability is shown by a drop from the
prior year (296.12 INR crores in FY 2018–19).
Net Sales 4,595.56 Indian Rupees: A decline from FY 2018–19 (4,595.38 INR crores) could
be a sign of difficulties with pricing or sales.
Assets totalling 11,518.26 INR crores: Business expansion is shown by a minor increase from
the prior year (9,583.76 INR crores in FY 2018–19).
Equity Held by Average Shareholders (4,352.41 INR crores): A rise from the prior year
(4,264.55 INR crores in FY 2018–19) suggests that shareholder equity has grown favourably.
Margin of Profit (0.08): Consistent profitability was indicated by the profit margin's relative
stability.
Turnover in Total Assets (0.40): A moderate turnover rate indicates that resources are used
quite efficiently.
Multiplier of Equity (2.65): A little rise suggests a moderate reliance on debt to finance assets.
ROI (return on equity) 8.36%: A decent return on shareholders' equity is indicated by a
moderate ROE.
FY 2018-19:
Net income of 296.12 INR crores: A little rise over the prior year's net income of 265 INR
crores in the fiscal year 2017–18, indicates increased profitability.
Net Sales (4,595.38 INR crores): This is a consistent amount of sales over the prior year.
Total Assets: 9,583.76 INR crores: A slight rise suggests possible business growth.
Average Shareholders' Equity (4,264.55 INR crores): Positive growth in shareholder equity
is indicated by the increase over the prior year (3,771.66 INR crores in FY 2017–18).
Profit Margin (0.06): A tiny percentage of sales is retained as profit when the profit margin is
low.
Turnover in Total Assets (0.48): A moderate turnover rate indicates that assets are being used
quite efficiently.
Multiplier of Equity (2.25): A decline suggests a lessened reliance on debt to finance assets.
Equity Return (ROE - 6.94%): A decent return on shareholders' equity is indicated by a
moderate ROE.

21
Four-year average return on equity (ROE): The average ROE for the four years shows a
mediocre performance in terms of making profits from shareholders' equity. 4 Years Avg. ROE
10.03%
As we compared 4years average of both companies dupont analysis we observed that
IHCL is performing better than lemon tree hotel
Considering the net profit margin, asset turnover, and financial leverage, Lemon tree hotel
demonstrates a less efficient use of resources to generate returns compared to IHCL.
The DuPont analysis reveals that IHCL ROE is driven more by operational efficiency, whereas
Lemon tree hotel ROE is influenced less by financial leverage."
Conclusion:
1. Lemon Tree Hotel:
● Experiencing negative ROE in recent years.
● Operational difficulties and financial trouble indicated by negative profit
margins and low asset turnover.
● High reliance on debt (equity multiplier) impacting overall profitability.
2. IHCL Company Ltd:
● Generally positive ROE over the years.
● Improved profitability (positive profit margins) and moderate asset turnover.
● Less reliance on debt financing compared to Lemon Tree Hotel.
Comparison:
● IHCL Company Ltd has shown better financial performance and management
efficiency compared to Lemon Tree Hotel.
● Lemon Tree Hotel's negative ROE suggests challenges in generating profits from
shareholder equity, potentially due to high debt and operational issues.
● IHCL Company Ltd's positive ROE indicates effective use of equity to generate profits.

22
 CHAPTER 8- Common Size analysis
Financial managers utilize a tool called common size analysis, sometimes known as vertical
analysis, to examine financial accounts. It expresses each line item as a percentage of a base
amount for that time in order to evaluate financial statements. Understanding the significance
of each line item in the financial statements and how it affects the final figure is made easier
with the aid of the analysis.
The balance sheet, income statement, and cash flow statement are the three main financial
statements that can be analysed using this method. Total assets is the common base item on the
balance sheet, and total revenues is the common base item on the income statement, to which
other line items are connected.
Formula for Common Size Analysis:
Percentage of base = Amount of the individual item/ Amount of base item *100
Analysing particular line items in relation to a base item within the same financial period is
known as vertical analysis. For instance, by dividing the inventory line using total assets as the
basis item, we may determine the proportion of inventory on the balance sheet.
Balance Sheet Common Size Analysis:
The total assets value is typically used as the base value in the balance sheet common size
analysis. The common size analysis can be used by investors or financial managers to assess
how a company's capital structure stacks up against competitors. By comparing certain line
items to the total assets, they can draw significant conclusions.
A high ratio of long-term debt to total asset value, for instance, could indicate that the business
is in danger of going bankrupt.
Let's use Lemon tree hotel, which has the following balance sheet:

23
Common Size Analysis of Balance Sheet of Lemon tree hotel

24
Non-Current Assets:
1. Property, Plant, and Equipment (PPE):
● March 20-21: 25.27%
● March 21-22: 69.04%
● Explanation: This represents the value of physical assets like buildings, machinery,
and land. The significant increase suggests a substantial investment in property, plant,
and equipment, indicating potential expansion, modernization, or acquisition of new
assets.
2. Capital Work-in-Progress:
● March 20-21: 0.97%
● March 21-22: 8.10%
● Explanation: Capital work-in-progress represents costs incurred on long-term projects
still in progress. The substantial increase indicates ongoing projects or significant
capital expenditures during the later period.
3. Investment Property:
● March 20-21: 0.15%
● March 21-22: 0.05%
● Explanation: Investment property includes real estate held for investment purposes.
The decrease may suggest a change in the company's real estate investment strategy,
possibly through sales or reevaluation of the portfolio.
4. Intangible Assets:
● March 20-21: 0.17%
● March 21-22: 0.40%
● Explanation: Intangible assets include non-physical assets like patents, trademarks,
and copyrights. The increase may result from the development or acquisition of new
intangible assets, reflecting potential investments in intellectual property.
5. Right to Use Asset:
● March 20-21: 10.09%
● March 21-22: 11.83%
● Explanation: This represents the value of assets the company has the right to use,
typically associated with leased assets. The increase suggests a growing reliance on
leased assets, which may be a part of the company's operational strategy.
6. Goodwill on Consolidation:
● March 20-21: 0.00%
● March 21-22: 2.62%
● Explanation: Goodwill arises from the excess of the purchase price over the fair value
of net assets acquired in a business combination. The appearance of goodwill indicates
consolidation activities or acquisitions during the later period.
7. Intangible Assets under Development:
● March 20-21: 0.00%
● March 21-22: 0.06%
● Explanation: This represents the cost of developing intangible assets that are not yet
completed. The increase suggests ongoing efforts in developing intangible assets.
8. Financial Assets (Investments, Loans, Other):
● March 20-21: 51.96%
● March 21-22: 2.20%

25
 ● Explanation: This category includes various financial instruments. The significant
decrease indicates a major shift in the company's investment portfolio, possibly
divestment or reevaluation of investment strategies.
9. Deferred Tax Assets:
● March 20-21: 2.74%
● March 21-22: 1.27%
● Explanation: Deferred tax assets arise from temporary differences between accounting
and tax rules. The decrease may indicate changes in tax planning or a reduction in the
expected utilization of tax benefits.
10. Other Non-Current Assets:
● March 20-21: 0.08%
● March 21-22: 0.16%
● Explanation: This includes various non-current assets not covered by other categories. The
increase may indicate diversification or the addition of new non-current assets.
Current Assets:
1. Inventories:
● March 20-21: 0.12%
● March 21-22: 0.22%
● Explanation: Inventories represent the value of goods held for sale. The increase may
suggest changes in inventory management, such as stockpiling or a shift in product
offerings.
2. Financial Assets (Trade Receivables, Cash, Loans, Other):
● March 20-21: 8.19%
● March 21-22: 2.45%
● Explanation: This category includes various financial assets, such as trade receivables
and cash. The significant decrease indicates changes in receivables, cash management,
or overall financial asset composition.
3. Other Current Assets:
● March 20-21: 1.75%
● March 21-22: 0.86%
● Explanation: Other current assets include miscellaneous items like prepaid expenses
and short-term investments. The decrease might indicate changes in the composition
or management of other current assets.
March 20-21:
Equity:
1. Share Capital (49.44%):
● Share capital constitutes 49.44% of the Total Equity and Liabilities.
● This indicates that a significant portion of the company's funding comes from
its shareholders through the issuance of capital.
2. Other Equity (13.31%):
● Other equity items contribute 13.31% to the Total Equity and Liabilities.
● These items might include reserves, retained earnings, or other components of
equity beyond share capital.
3. Equity attributable to owners of the parent (0.00%):
● There seems to be an anomaly here, as the equity attributable to owners of the
parent is shown as 0.00%.

26
 ● This could be an error or omission in the data presentation.
4. Non-controlling interests (0.00%):
● Non-controlling interests also appear as 0.00% in this period.
● It's unusual for a company not to have any non-controlling interests, so this may
be a reporting or data presentation issue.
Liabilities:
5. Non-current liabilities (30.76%):
● Non-current liabilities account for 30.76% of the Total Equity and Liabilities.
● Financial liabilities (Borrowings and Lease liability) contribute the majority of
this percentage, indicating a substantial portion of long-term obligations.
6. Current liabilities (6.48%):
● Current liabilities represent 6.48% of the Total Equity and Liabilities.
● This includes short-term financial liabilities, provisions, and other current
liabilities.
March 21-22:
Equity:
7. Share Capital (21.77%):
● Share capital has decreased to 21.77% of the Total Equity and Liabilities.
● There has been a significant reduction in the proportion of equity from share
capital.
8. Other Equity (1.11%):
● Other equity now contributes only 1.11% to the Total Equity and Liabilities.
● This is a substantial decrease, suggesting changes in reserves or retained
earnings.
9. Equity attributable to owners of the parent (22.88%):
● Equity attributable to owners of the parent has increased to 22.88%, indicating
a higher share of equity owned by the company's owners.
10. Non-controlling interests (15.63%):
● Non-controlling interests now contribute 15.63% to the Total Equity and
Liabilities.
● This suggests an increase in the share of the company owned by non-controlling
interests.
Liabilities:
11. Non-current liabilities (54.52%):
● Non-current liabilities have increased significantly to 54.52% of the Total
Equity and Liabilities.
● Financial liabilities, particularly borrowings and lease liabilities, have a
substantial impact on this percentage.
12. Current liabilities (6.97%):
● Current liabilities remain relatively stable at 6.97% of the Total Equity and
Liabilities.
● While there is a slight increase, it is not as pronounced as the changes in non-
current liabilities.

27
Lemon tree hotel Common Size Analysis of Profit & Loss A/c

The base item in the income statement is usually the total sales or total revenues. Common size
analysis is used to calculate net profit margin, as well as gross and operating margins. The
ratios tell investors and finance managers how the company is doing in terms of revenues, and
can be used to make predictions of future revenues and expenses. Companies can also use this
tool to analyse competitors to know the proportion of revenues that goes to advertising,
research and development, and other essential expenses.

● Finance Costs:
March 2020-21: 71.88%
March 2021-22: 43.47%
Explanation: The decrease in finance costs as a percentage of total income from 71.88% to
43.47% suggests a relative improvement in managing financial expenses.
● Finance Income:
March 2020-21: -3.30%

28
 March 2021-22: -1.67%
Explanation: Both periods show negative percentages, indicating that finance income is not
a significant contributor to total income. The improvement from -3.30% to -1.67% suggests
a slight reduction in the negative impact.
Depreciation and Amortization Expense:

March 2020-21: 40.59%

March 2021-22: 25.07%
Explanation: The decrease from 40.59% to 25.07% indicates a relative decrease in the
proportion of depreciation and amortization expenses in total income, which is generally
positive.
● Profit/(Loss) Before Exceptional Items and Tax:

March 2020-21: -81.04%

March 2021-22: -34.99%
Explanation: There is an improvement from -81.04% to -34.99%, suggesting a significant
reduction in losses before exceptional items and tax as a percentage of total income.
● Share of (Loss)/Profit of Associate:

March 2020-21: -1.51%

March 2021-22: 0.25%
Explanation: The shift from a negative to a positive percentage indicates a change from a
loss to a profit in the share of associates, which is a positive sign.
● Profit/(Loss) Before Tax:

March 2020-21: -82.55%

March 2021-22: -34.74%
Explanation: The improvement from -82.55% to -34.74% suggests a significant reduction
in losses before tax as a percentage of total income.
● Understanding the Result:

● Positive Changes: Reduction in finance costs, improved profit/loss figures, and positive
shifts in the share of associates are positive indicators.

● Negative Changes: The negative finance income suggests the company is incurring costs
rather than earning income.

● Interpretation: The company has made significant improvements in controlling finance

costs, reducing overall losses, and turning the share of associates into a profit.

● The negative finance income indicates that the company is paying more in finance costs
than earning through financial instruments.

29
IHCL Common Size Analysis of Balance sheet of IHCL

30
As at 31-03-21:
1. Non-current Assets (89.98% of Total Assets):
● Property, Plant and Equipment account for 49.75% of the total assets.
● Capital Work in Progress constitutes 1.43%.
● Right-of-Use Assets make up 13.29%.
● Goodwill represents 5.31%.
● Other Intangible Assets contribute 4.94%.
● Investment accounted using the equity method is 5.02%.
● Financial assets, including Investments, Loans, and Other Financial Assets, sum
up to 3.68%.
● Income-tax and Deferred Tax Assets combined make up 1.02% and 1.77%,
respectively.
● Other Non-current Assets account for 2.75%.
2. Current Assets (10.02% of Total Assets):
● Inventories represent 0.81%.
● Financial assets, including Investments, Trade Receivables, Cash and Cash
Equivalents, Other Balance with Bank, Loans, and Other Financial Assets,
contribute 6.25%.
● Other Current Assets make up 1.15%.
● Assets Classified as Held for Sale represent 0.01%.
Total Assets: 100.00%
As at 31-03-22:
1. Non-current Assets (79.57% of Total Assets):
● Property, Plant and Equipment now constitute 43.74%.
● Capital Work in Progress increases to 1.48%.
● Right-of-Use Assets decrease to 11.56%.
● Goodwill decreases to 4.76%.
● Other Intangible Assets decrease to 4.23%.
● Intangible Assets Under Development contribute 0.23%.
● Investment accounted using the equity method decreases to 4.18%.

31
 ● Financial assets, including Investments and Other Financial Assets, sum up to
4.60%.
● Deferred Tax Assets increase to 1.21%.
● Advance Income Tax decreases slightly to 1.52%.
● Other Non-current Assets contribute 2.29%.
2. Current Assets (20.43% of Total Assets):
● Inventories decrease to 0.77%.
● Financial assets, including Investments, Trade Receivables, Cash and Cash
Equivalents, Other Balance with Bank, Loans, and Other Financial Assets,
significantly increase to 18.55%.
● Other Current Assets contribute 1.07%.
● Assets Classified as Held for Sale remain at 0.01%.

1. Non-current Liabilities:
● Financial Liabilities:
● (i) Borrowings: In the most recent period (31-03-22), borrowings
represent 10.60% of the total equity and liabilities, a decrease from
19.32% in the previous period (31-03-21).
● Lease liabilities: Lease liabilities constitute 14.21% of the total equity
and liabilities in the current period, down from 16.04% in the previous
period.
● Others financial liabilities: Other financial liabilities make up 0.22% of
the total equity and liabilities in both periods.
● Provisions: Provisions account for 0.73% of the total equity and liabilities in
the current period, down from 0.80% in the previous period.
● Deferred Tax Liabilities (Net): Deferred tax liabilities (net) constitute 0.67%
of the total equity and liabilities in the current period, slightly lower than 0.68%
in the previous period.
● Other Non-current Liabilities: Other non-current liabilities make up 0.08% of
the total equity and liabilities in the current period, down from 0.14% in the
previous period.
● Total Non-current Liabilities: The total non-current liabilities represent
26.51% of the total equity and liabilities in the current period, a decrease from
37.19% in the previous period.

32
2. Current Liabilities:
● Financial Liabilities:
● (i) Borrowings: Borrowings account for 4.56% of the total equity and
liabilities in the most recent period, down significantly from 12.24% in
the previous period.
● Lease liabilities: Lease liabilities constitute 0.33% of the total equity and
liabilities in the current period, slightly lower than 0.34% in the previous
period.
● (i) Trade payables: Trade payables make up 2.96% of the total equity
and liabilities in the current period, up from 2.76% in the previous
period.
● (ii) Other financial liabilities: Other financial liabilities represent 2.89%
of the total equity and liabilities in the current period, a decrease from
6.16% in the previous period.
● Other Current Liabilities: Other current liabilities account for 2.51% of the
total equity and liabilities in the current period, up from 2.32% in the previous
period.
● Provisions: Provisions make up 1.50% of the total equity and liabilities in the
current period, slightly higher than 1.48% in the previous period.
● Current Income Tax Liabilities (Net): Current income tax liabilities (net)
represent 0.27% of the total equity and liabilities in the current period, slightly
lower than 0.30% in the previous period.
● Total Current Liabilities: The total current liabilities account for 15.00% of
the total equity and liabilities in the current period, a decrease from 25.61% in
the previous period.
3. Total Liabilities (1+2): The total liabilities, including both non-current and current
liabilities, make up 41.52% of the total equity and liabilities in the current period, a
decrease from 62.80% in the previous period.
4. Total Equity and Liabilities (A+B): This is the base item and remains unchanged at
100% for both periods. It represents the sum of equity and liabilities on the balance
sheet.

33
IHCLCommon Size Analysis of Profit & Loss A/c of IHCL

34
IHCL's
Common Size Analysis as of March 31–21:
Income:
● Revenue from operations: 90.53% of total income
● Other Income: 9.47% of total income
Expenses:
● Food and beverages consumed: 8.27% of total income
● Employee benefits expense and payment to contractors: 51.38% of total income
● Finance costs: 23.15% of total income
● Depreciation and amortization expense: 23.54% of total income
● Other operating and general expenses: 51.68% of total income
Profitability Metrics:
● Profit before exceptional items, tax, and share of profit of equity accounted investees:
-58.02% of total income
● Exceptional Item: 9.19% of total income
● Profit before tax and share of profit of equity accounted investees: -48.83% of total
income
● Total tax expense: -8.93% of total income
● Profit/(Loss) after tax before share of profit of equity accounted investees: -39.90% of
total income
● Share of profit of associates and joint venture (net of tax): -5.83% of total income
● Profit/Loss for the year: -45.73% of total income
Common Size Analysis for IHCL as of 31-03-22:
Income:
● Revenue from operations: 95.17% of total income
● Other Income: 4.83% of total income
Expenses:
● Food and beverages consumed: 8.01% of total income
● Employee benefits expense and payment to contractors: 35.82% of total income
● Finance costs: 13.32% of total income

35
 ● Depreciation and amortization expense: 12.64% of total income
● Other operating and general expenses: 38.74% of total income
Profitability Metrics:
● Profit before exceptional items, tax, and share of profit of equity accounted investees:
-8.53% of total income
● Exceptional Item: 0.49% of total income
● Profit before tax and share of profit of equity accounted investees: -8.04% of total
income
● Total tax expense: -1.11% of total income
● Profit/(Loss) after tax before share of profit of equity accounted investees: -6.93% of
total income
● Share of profit of associates and joint venture (net of tax): -1.33% of total income
● Profit/Loss for the year: -8.25% of total income
Analysis:
● IHCL's revenue from operations has increased from 90.53% to 95.17%, indicating
growth in the core business.
● Employee benefits expense and payment to contractors have decreased from 51.38% to
35.82%, contributing to improved cost management.
● Finance costs have slightly increased from 23.15% to 13.32%, which may be an area
for further investigation.
● The exceptional item as a percentage of total income has decreased, suggesting a
reduction in extraordinary events impacting the financials.
● The overall profitability has improved, with a decrease in the percentage of loss after
tax from -39.90% to -6.93%.
Outcome:

⮚ Both companies have shown decreases in total liabilities, particularly in borrowings and
lease liabilities.
⮚ IHCL has experienced a decrease in property, plant, and equipment, while Lemon Tree
Hotel has shown a significant increase in this category.
⮚ Both companies have experienced a decrease in current liabilities, especially in borrowings
and other financial liabilities.
⮚ Lemon Tree Hotel has shown a decrease in equity, while IHCL has shown a decrease in
share capital and other equity.

36
⮚ IHCL has seen an increase in non-controlling interests, indicating a higher share of the
company owned by external parties.
⮚ Finance Costs:
Lemon Tree has shown a more significant improvement in managing finance costs.

⮚ Employee Benefits and Contractors:

IHCL has reduced this expense as a percentage of total income, indicating better control.

⮚ Finance Costs (IHCL):

IHCL has also reduced finance costs significantly.

⮚ Depreciation and Amortization:

Both companies have managed to reduce these expenses, but IHCL has a slightly lower
percentage.

⮚ Overall Profit/Loss:
Both companies have improved their overall profitability, with IHCL showing a less negative
percentage in the latest period.

⮚ Associates' Performance:
Lemon Tree has shown a positive shift in the share of associates, while IHCL's share of profit
of associates has decreased.

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 CHAPTER 9- FINDING AND ASSUMPTION

Compare the last few years' revenue growth of Indian Hotels with that of Lemon Tree Hotel.
Examine the various revenue streams, including reservations for rooms, food and beverage
offerings, and any additional sources.

Analyse profitability statistics such as operating margin, return on equity, and net profit margin
to determine how well the businesses generate money.

● To ascertain both companies' short-term liquidity positions, examine their current and
quick ratios.

● To determine the financial leverage, evaluate the debt levels using measures like the
debt-to-equity ratio and the interest coverage ratio.
● Cost Organization:
● Examine the cost structure to determine the main cost elements and the effectiveness
of the cost management process.
● Market Part:
● Ascertain Lemon Tree Hotel's and Indian Hotels' respective market shares in the
lodging sector.
● macroeconomic variabl
● Take into account macroeconomic variables that could affect the hotel business, such
as inflation, GDP growth, and travel trends.
● Premises:
● The state of the economy:
● Presumptions on the general state of the economy and how it affects the hotel sector.
● Trends in the Market:
Presumptions regarding market developments in the hotel industry, including as shifts
in customer wants and preferences.
● Competitive Environment
● Presumptions on the nature of the competition and the relative positions of each hotel.
● The regulatory landscape presumptions about laws that affect the hotel sector, like those
pertaining to taxes and license requirements.

Presumptions on the expansion or contraction of the tourism sector and how it affects lodging
establishments.

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 CHAPTER 10- SUGGESTIONS
Increase Profit Margins: By cutting expenses, boosting productivity, and looking into
revenue diversification techniques, both businesses should concentrate on raising their profit
margins.
Improve Asset Turnover: To increase revenue per unit of assets, improve the efficiency of
asset utilization. This could entail resource usage and strategic asset management.
Optimize Capital Structure: To identify the best capital structure that reduces the cost of
capital and optimizes shareholder value, assess the present debt and equity mix.
Invest in Marketing and Branding: In order to expand market share and draw in more clients,
both businesses can gain by stepping up their marketing campaigns and developing their
brands.
Customer satisfaction programs: Put in place customer satisfaction campaigns to draw in
new clients and keep hold of current ones, which will boost profit margins and the company's
bottom line.
Cost Control Measures: To lessen the effect of variable expenses on total profitability, put
strict cost control measures in place.
Risk Management Strategies: To reduce possible financial risks and uncertainties, create and
put into practice strong risk management strategies.
Investigate New Revenue Streams: To diversify income sources and lessen reliance on a
particular segment, find and seize new company possibilities or revenue streams.

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 CHAPTER 11- LIMITATIONs
Macroeconomic influences: External influences can have a major impact on financial
performance and limit the efficacy of internal strategies. Examples of these factors include
economic downturns, interest rate changes, and geopolitical events.
Competition in the sector: The hotel sector is very competitive, which can affect profit
margins and restrict the ability to set prices. Currency fluctuations can provide a difficulty for
businesses that operate across various locations and might have an impact on their financial
results.
Regulatory Environment: Modifications to tax laws, industry standards, or governmental
rules may present problems for the stability of the financial system.
Dependency on Tourism: Businesses that heavily rely on tourism may be vulnerable to
hazards brought on by changes in travel patterns and world events.
Operational Risks: Unexpected maintenance problems or supply chain interruptions are
examples of operational difficulties that might affect a company's financial performance.
Human Resource Challenges: In the hospitality sector, attrition, labor disputes, and skill
shortages can have an impact on customer service and operational effectiveness.
Technological Disruptions: Quick advancements in technology may necessitate large
infrastructure investments, which could have an effect on short-term profitability.

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 CHAPTER 12- RECOMMENDATION
Frequent Financial Monitoring: Monitor changes in important financial indicators and take
immediate action to rectify any problems by performing routine DuPont analyses.
Strategic Alliances: To improve market presence and obtain a competitive edge, look into
potential strategic partnerships or alliances.
Investment in Training Programs: To improve customer happiness and service quality,
invest in employee training programs.
Diversification of Services: To lower business risks and diversify revenue streams, think about
launching new services or branching out into untapped markets.
Digital Transformation: Adopt digital technologies to improve marketing tactics, customer
experience, and operational effectiveness. To effectively traverse uncertainties, it is important
to regularly assess and adjust risk management plans. This will strengthen risk management.
Frequent Internal Audits: To find and address financial disparities and operational
inefficiencies, conduct routine internal audits.
Community Involvement: Take part in community-focused projects to strengthen your
brand's reputation and encourage local support.

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 CHAPTER 13- CONCLUSION
In conducting a financial analysis of Lemon Tree Hotel and Indian Hotels, the study employed
common size analysis and DuPont analysis to assess their respective performance. Common
size analysis involved expressing income statement and balance sheet items as percentages of
total revenue and assets, respectively. This facilitated a comparison of revenue composition,
cost structures, and asset utilization between the two companies. On the other hand, DuPont
analysis decomposed the return on equity (ROE) into net profit margin, total asset turnover,
and equity multiplier components. By evaluating these components, the study sought to
identify the factors driving differences in ROE between Lemon Tree Hotel and Indian Hotels.
The analysis aimed to provide insights into profitability, operational efficiency, and financial
leverage. Conclusively, the study determined which company demonstrated superior
performance in terms of profitability, operational efficiency, and overall financial health,
considering the nuances of the hospitality industry and broader economic conditions.

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 CHAPTER 14- BIBLOGRAPHY

• https://www.researchgate.net/publication/347260186_A_study_on_financial_perform
ance_evaluation_using_DuPont_analysis_in_select_automobile_companies
• https://www.jstor.org/stable/30244502
• https://scholar.archive.org/work/fel2vqgw3zdinirw3iaz3zw65a/access/wayback/http://
faculty.haas.berkeley.edu/kli/papers/soliman-2008tar.pdf
• https://www.hufocw.org/Download/file/21786
• https://www.researchgate.net/publication/330857425_Chapter7_Common_Size_Anal
ysis
• https://www.researchgate.net/publication/337464922_COMMON_SIZE_STATEME
NT_A_TECHNIQUE_OF_FINANCIAL_ANALYSIS

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