Stock Review: INDIAN Hotels Company

INDIAN Hotels Company, one of the largest hotel players and owner of the Taj brand, showed a 15% growth in net sales on a year-on-year basis. It, however, posted a loss of . 6.3 crore in the quarter. Two factors contributed to this decline: a one-time charge of . 16 crore for re-branding its 19 hotels under the 'Vivanta by Taj' brand and the negative impact due to the bad press for the Commonwealth Games in Delhi. In the September quarter of the last fiscal, the company's numbers were bolstered by other operating income in the form of the insurance amount it received for damages suffered in the terror attacks on its Mumbai property in November 2008. In the latest quarter, the column was blank. The hotel industry, on the whole, is seeing increased occupancy levels and revenue per available room in all major cities. According to a research done by HVS, a leading consultant, hotels in all major Indian cities — Mumbai, Delhi, Chennai, Kolkata and Goa — have consistently shown an improvement in their revenue per available room and occupancy levels. For instance, in Bengaluru, one of the most-preferred business destinations in the country, the occupancy rates in the first half of this fiscal recorded a growth of 17% compared with last year's first half figures. In terms of revenue per available room, the city saw a growth of around 10% y-o-y to . 4,043 in the first half of the fiscal.

   Indian Hotels Company also benefitted from the positive sentiments, as it, too, witnessed higher occupancy rates and average room rates. For the first half of this fiscal, the company's hotels saw occupancy rate grow to 62% from 56% in the last fiscal's first half. The company's hotels also recorded a 4% jump in revenue per available room to . 7,968 on a year-on-year basis.

   Going forward, the December and March quarters are expected to be good for the company due to the holiday season — both for domestic and foreign tourists.

   According to the website of the ministry of tourism, in the January to September period this year, the arrival of foreign tourists had increased by 10% compared with the same period last year. The increase in the number of foreign tourists coming to the country, coupled with the company's decision to increase its average room rates from November 1, would help it record a better growth in the second half of this fiscal compared with last year's second half. Analysts expect the company's domestic hotels to clock occupancy rates of 75% to 80% in the second half of the fiscal.

   Also, with the company's flagship Mumbai Taj property fully opened and the expansion of its hotels in full swing — the company plans to add around 1,488 rooms this fiscal — analysts expect India Hotels to end this fiscal with better profits. Besides, the company is also raising around . 850 crore in two tranches by issuing around 36 million shares and 48 million warrants to its promoters to lessen its debt burden. This would also strengthen its balance sheet.