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Indian Hotels: Margin pressure

Jan 16, 2004

Indian Hotels Company Limited (IHCL), the hospitality major, reported a strong performance for the December quarter. The company clocked an 11% topline growth, while its bottomline has grown by nearly 49% in the December quarter on a YoY basis. What is, however, disturbing is that the company's operating margins have dropped significantly and the improvement in bottomline was mainly due to higher other income, extraordinary income (sale of assets) as well as due to a smaller base (due to extraordinary expenses) in December last year. Lower interest expenses has also contributed to the bottomline improvement.

(Rs m) 3QFY03 3QFY04 Change 9mFY03 9mFY04 Change
Net Sales 1,689 1,878 11.2% 3,974 4,539 14.2%
Other Income 16 44 179.2% 173 201 16.4%
Expenditure 1,290 1,538 19.3% 3,233 3,867 19.6%
Operating Profit (EBDIT) 400 340 -15.0% 740 673 -9.1%
Operating Profit Margin (%) 23.7% 18.1%   18.6% 14.8%  
Interest 94 54 -42.5% 294 181 -38.6%
Depreciation 116 121 4.1% 351 350 -0.3%
Profit before Tax 205 209 1.9% 268 343 28.1%
Extraordinary items (33) 11   (33) (18)  
Tax 60 53 -10.9% 86 87 0.3%
Profit after Tax/(Loss) 112 166 48.6% 148 238 60.6%
Net profit margin (%) 6.6% 8.8%   3.7% 5.3%  
No. of Shares 45.0 45.1   45.0 45.1  
Diluted Earnings per share* 9.9 14.7   4.4 7.0  
P/E Ratio         63.9  
(* annualised)            

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