Indian Hotels Company Ltd (IHCL), India's largest hotel chain has reported a 21% growth in its net profit for 3QFY01 to Rs 402 m as compared to Rs 333 m for 3QFY00. This was driven by a 10% increase in operating profits and a large jump in other income for the quarter.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Diluted number of shares
Diluted Earnings per share*
IHCL's sales grew by 13.7% YoY during the 3QFY01 due to higher occupancy rates in its metro city hotels. The company's average room rates for this period are also likely to be up as the company had revised its room tariffs by 5%-10% at its metro based hotels in October 2000.
Its other income for the 3QFY01 includes profit on sale of idle assets to the tune of Rs 46.7 m. The company was keen to sell of a part of its 17-acre plot of vacant land in North Mumbai. The company had purchased this property around 20 years back. We assume the company has sold part of this plot in the 3QFY01.
As IHCL has no intention of opening a hotel in North Mumbai due to the oversupply gaining momentum there, the gains from the sale of this property will definitely boost the company's cash flows and help the company pump in funds for future expansions elsewhere.
On the operating level the company has not reported a large jump YoY mainly due to ongoing renovations at its hotels in Mumbai, Delhi and Calcutta in 3QFY01. This has resulted in a drop in its margins by 100 basis points to 29.7% in 3QFY01.
Though this may not seem very encouraging we feel the company's newly renovated hotel in Mumbai (which contributes to 36% of IHCL's profits) will drive its future earnings growth and is well equipped to meet the increasing competition in Mumbai city. This strategy of renovations in the current year will pay off in the long run, though it has strained its short-term profits.
On the whole IHCL's profit is slightly lower than our expectations. This is mainly due to lower numbers on the operating level in the 3QFY01. For the full year (FY01E) we have forecast a net of Rs 1,177 m.. However we will maintain our full year numbers at the same level as IHCL has gained through profit on sale of assets.
On the current price of Rs 255 it is trading at 9.8x FY01 EPS of Rs 26.1.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407