Indian Hotels Co. Ltd (IHCL) has reported a net profit of Rs 1,132 m for FY2000 which is a fall of 12.3% YoY. The company's sales improved marginally by 0.3% YoY to Rs 5,913 m in FY2000 as compared to Rs 5,893 m in FY99.
IHCL, India's largest hotel chain reported a sales of Rs 5,913 m in FY2000. It currently operates 48 hotels in India under the "Taj" brand. The company's operations have been regrouped under five strategic business units: Luxury Hotels Division, Business Hotels Division, Leisure Hotels Division, Air Catering Services and the International Operations Division.
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IHCL's operating margins fell from 30.1% in FY99 to 26.5% in FY2000. The main reasons for this decline can be attributed to pressure on occupancy rates and average room rates during the year as the hotel industry continued to face difficult times. However company has stated that in the current year the position has started to improve.
As the economy has started to improve the scenario for hotel companies is set to improve in the current year. IHCL which gets around 60% of its profits from its hotel properties in Mumbai and Delhi, will be a beneficiary of any increases in business travel.
Besides this its thrust of opening hotels in leisure destinations in the past which also continues will benefit the company in future. IHCL will be able to take advantage of a pick up in leisure travel when India's potential as a tourist destination goes up.
IHCL plans to spend around Rs8 bn for its expansion plans over the next four to five years which would be financed through a mix of debt and internal accruals. The thrust of these expansions would be on both the business and leisure hotel segments.
IHCL's results seem to be already discounted by the market, and hence the fall in profits provide no surprise to investors. At the current price of Rs 199.7, the stock is trading at 8x FY2000 earnings and the negative news regarding the hotel industry is in the price.
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