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Hotel Leelaventure: Lower interest costs drive net

May 3, 2001

Hotel Leelaventure, which owns and operates two hotels in Mumbai and Goa has reported a net profit of Rs 163 m for FY01, a growth of 87% YoY. However for 4QFY01, the company reported a net profit of Rs 76 m which is a decline of 7.9% YoY.

(Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
Sales 374 352 -5.9% 1,220 1,223 0.2%
Other Income 56 31 -44.3% 144 132 -8.1%
Expenditure 252 202 -20.0% 776 792 2.0%
Operating Profit (EBDIT) 121 150 23.6% 444 431 -2.9%
Operating Profit Margin (%) 32.4% 42.6%   36.4% 35.3%  
Interest 30 35 15.3% 301 193 -35.8%
Depreciation 53 56 4.9% 188 192 2.2%
Profit before Tax 94 91 -3.7% 99 178 79.6%
Other Adjustments - -   - -  
Tax 12 15 25.0% 12 15 25.0%
Profit after Tax/(Loss) 82 76 -7.9% 87 163 87.1%
Net profit margin (%) 22.0% 21.5%   7.1% 13.3%  
No. of Shares (eoy) (m) 32.7 60.4   32.7 60.4  
Diluted number of shares 60.4 60.4   60.4 60.4  
Diluted Earnings per share* 5.4 5.0   1.4 2.7  
*(annualised)            

Lower interest costs during FY01, has led the company to report a vast improvement in its FY01 net profit, as a result of financial restructuring during the year. The company reduced its debt, by issuing 27.6 m equity shares taking up its capital to Rs 604 m. The company redeemed preference shares to the tune of Rs 225 m during the year.

In 4QFY01, despite a sharp jump in its operating margins as a result of reduction in its operating expenditure, the company's net declined due to higher tax provision as well as higher interest costs in 4QFY01.

Considering that the five star hotel industry has picked up in FY01, Hotel Leelaventure's results on the operational front hardly report any siginficant improvement. For FY01, the company's sales grew by a meagre 0.2% YoY. Considering that the Mumbai hotel market did really well in FY01 and this accounts for 80% of Hotel Leelaventure's profits, the company has not performed well. The reason being higher competition in the five star deluxe segment in North Mumbai by opening of a couple of hotels here. The hotels namely are Regent, Le Meridien and the Maratha Sheraton. For many years Hotel Leelaventure has been the only hotel in this area in the five star deluxe category.

Hopefully the company will get some respite in FY02, when its hotel in Bangalore opens in 2QFY02, as its earnings will get diversified. The company's commercial complex projects in Mumbai and Bangalore are ready and are in the process of being leased out.

On the current price of Rs 19, Hotel Leelaventure is trading at 7.0x FY01E EPS of Rs 2.7.


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