ITC Hotels: Peers racing ahead - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

ITC Hotels: Peers racing ahead

Jul 15, 2002

It was another tough quarter for ITC Hotels Ltd., which owns and operates the Welcome Group of hotels. There seems to be a jinx on the hospitality sector, as the industry has been hit by a string of negative events over the past eighteen months. Quarter ended June '02 could be impacted by the travel advisories issued by U.S and few commonwealth states.

(Rs m)1QFY021QFY03Change
Sales 262 249 -5.3%
Other Income 11 1 -88.6%
Expenditure 235 239 1.7%
Operating Profit (EBDIT) 28 10 -64.7%
Operating Profit Margin (%)10.5%3.9% 
Interest 8 5 -35.9%
Depreciation 23 27 18.6%
Profit before Tax8-21 
Tax 1 2  
Profit after Tax/(Loss) 8 (23) 
Net profit margin (%)3.0%-9.2% 
No. of Shares 30.2 30.2  
Diluted Earnings per share -3.0 

Given the challenging operating environment, peer group companies seem to be adopting measures to prevent erosion in bottomline. However, the absence of reports suggesting similar initiatives by ITC Hotels could be a concern for investors. In the previous fiscal, the company registered the sharpest decline in operating margins compared to the big three domestic players. At 6.6%, the OPM was the lowest compared to double digits reported by the above-mentioned peer group. Staff costs, among the single largest expense head, continues to increase. The company had undertaken a voluntary separation package in FY01 amounting to Rs 10.5 m.

Cost break-up
(Rs m) 1QFY02 1QFY03 % change
Staff Costs63699.9%
Fuel, power & lighting41411.0%
Other Exp105105-0.7%
Total expenditure2352391.7%

There are market concerns as parent company, ITC Ltd., has also ventured into the hospitality sector. ITC Ltd., owns the Maurya Sheraton brand and has strengthened its position with new projects. The parent recently commissioned 'The ITC Grand Maratha' in Mumbai. Other projects in the pipeline include a business hotel in Mumbai, ITC Grand Central & Towers, and a luxury hotel, ITC Sonar Bangla Sheraton in Kolkata. These are capital intensive ventures and with performance of the subsidiary not able to meet the required project costs, it is likely that the parent took on the mandate. The management contracts of these hotels are likely to be with ITC Hotels Ltd., which could facilitate better performance. ITC Ltd. recently amalgamated its subsidiary ITC Bhadrachalam with itself, giving rise to speculation of a similar move regarding ITC Hotels.

Reports suggest that ITC Hotels subsidiary, Fortune Hotels, is planning to increase its brand awareness before venturing into a business expansion phase. The company, reportedly, operates 8 properties in the budget hotels category and is likely to build to 17-18 properties by end of FY04. The ITC Hotels stock is trading at Rs 54.

Equitymaster requests your view! Post a comment on "ITC Hotels: Peers racing ahead". Click here!


More Views on News

Revenge Travel is Here. 9 Stocks Likely to Benefit (Views On News)

Sep 4, 2021

The term 'revenge travel' refers to the desire of going on a vacation after an extended period of lockdown.

Why Did Shares of Jubilant FoodWorks Rally Today? (Views On News)

Jun 16, 2021

The company sees a 90% recovery despite minimal dine-ins.

Why Did Burger King India Shares Plunge 7% Yesterday? (Views On News)

May 28, 2021

Key takeaways from Burger King India Q4FY21 results.

Indian Hotels Q4 Review: Reports Net Loss, Revenue from Operations Decline (Views On News)

May 3, 2021

Key takeaways from Indian Hotels Q4FY21 results.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


  • Track your investment in ITC HOTELS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks