Sep 4, 1999|
'Other Income' boosts ITC Hotels' performance
ITC Hotels - a subsidiary of tobacco major ITC Limited, reported an impressive 67% increase in net profits to Rs 11 m in the first quarter of the current financial year. The turnover of the company rose by 4% to Rs 271 m during the same period.
ITC Hotels (FY99 turnover: Rs 1.2 bn) owns two five-star hotels in Bangalore and Jaipur and operates 9 other properties on license basis. The company also manages the Welcome Group chain of hotels. It has made sizeable investments in real estate in Bombay (about Rs 1.5 bn for over 17 acres of land) and Calcutta (Rs 500 m for over 4 acres). About 50% of this planned capital expenditure is to be made by the parent ITC Limited and the balance will be met by ITC Hotels along with its associates, subsidiaries and joint venture partners. The company currently has 2 JVs-with Fortune Park Hotels and Welcome Heritage Hotels. These investments will double ITC Hotels' room capacity from the present 3,077 rooms by March 2001.
ITC Hotels' performance seems creditable when compared to those of other companies in the sector. The first quarter of the current year saw Indian Hotels recorded an 8% dip in its net profit, while EIH saw its net profit plummet by 34%. But a scratch below the surface reveals that the company on an operational basis has fared no better than its peers. Like other hotel majors, its occupancy rates were also under pressure in the first quarter. What saved the day for ITC Hotels was a 33% surge in its other income. A sharp decrease in depreciation (about 7%) also helped.
ITC's performance underlines the need for the sector to look at other sources of income besides room rentals. The industry has already realised this and hotel majors have adopted various strategies to enhance returns. Industry majors have envisaged Investments worth Rs 20 bn over the next five years. A major portion of this investment will be directed towards hotel ancillary services like restaurants, shopping malls, and health clubs.
Analysts have re-rated the stock to a ' BUY' based on the company's performance and also on signs of an economic turnaround. Analysts are also viewing the upcoming hotel in Bombay positively, as they expect it to be a major revenue contributor in future. Some analysts are however not so optimistic. They view that the company is over dependent on its parent ITC Limited and has no financial backbone of its own. The recent rally saw the stock appreciate by over 55% to the current Rs 90 plus levels.
More Views on News
Sorry! There are no related views on news for this company/sector.
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 16, 2017
The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. 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