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Indian Hotels appoints Dresdner Kleinwort Benson for acquiring hotels - Views on News from Equitymaster
 
 
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  • Jan 14, 2000

    Indian Hotels appoints Dresdner Kleinwort Benson for acquiring hotels

    Indian Hotels Company Ltd (IHCL) has appointed Dresdner Kleinwort Benson (DKB) as consultants for its interests in acquiring the hotel properties of India Tourism Development Corporation Ltd (ITDC Ltd).

    IHCL, India's largest hotel chain reported a turnover of Rs 5,915 m in FY99. It currently operates 42 hotels in India under the "Taj' brand.

    As and when the government decides on the disinvestment, DKB will help IHCL by bidding for hiking IHCL's stake in ITDC or for totally acquiring selected hotels of ITDC. Currently IHCL owns 10% of equity in ITDC, the remaining equity being held by the government of India. The government has recently indicated that it plans to privatise ITDC by disinvesting around 74% of its equity. IHCL recently acquired the Blue Diamond Hotel in Pune for Rs 400 m.

    IHCL's current expansion plans envisage an investment of Rs 8 bn by opening of 17 new hotels over the next few years.

    This move to acquire or increase its stake in ITDC is very positive. ITDC a public sector hotel company has some of the best hotel properties at very good locations in India. However they are very badly managed and hence are not performing well.

    IHCL shall benefit by getting some of the best hotel properties in India and continue to expand its fleet of hotels. On the other hand IHCL will find it difficult to reduce the large work force of ITDC and also deal with bureaucratic problems. From the government's view point it would help in reviving ITDC from a loss making to a well managed and profitable hotel company, but that depends on the co-operation between the two companies.

    Market View:
    Hotel stocks have been out of favour for the past two years as a result of a fall in occupancy rates. IHCL however continues to be a long term favourite of analysts due to its large hotel network, aggressive expansion plans, professional management and its sound financials.

     

     

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