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Indian Hotels analyst meet update - Views on News from Equitymaster
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  • Oct 20, 2000

    Indian Hotels analyst meet update

    Indian Hotels Company Ltd (IHCL) announced their results last evening. They have reported a 38% growth in operating profits in the 2QFY01 and a 4% growth in net due to higher interest and depreciation costs.

    The following were the main points of the IHCL analyst meet:

    • In the 2QFY01, the company's room revenues went up by 9% to Rs 570 m, food and beverage grew by 19% to Rs 660 m and other services income grew by 31% to Rs 199 m. This has resulted in an overall increase in revenues by 16% YoY.
    • The operating profits went up by 38% in the 2QFY01, whilst the net operating profit (after interest and depreciation) grew by 19% to Rs 107 m as compared to Rs 90 m in the 2QFY00. Hence the low growth of 4% in net profit in the 2QFY01, is mainly due to a decline in other income.
    • The company has initiated a voluntary retirement scheme and the total outflow estimated is Rs 500m. This will be amortised over a period of 6 years. The company's aims to reduce staff strength by 1,100 through this.
    • IHCL will be spending Rs 380 m on renovations in the current year. It will spend Rs 110 m for its Mumbai hotels, Rs 105 m for the Taj Mahal, Delhi and Rs 117 m for the Taj Bengal, Calcutta. In Mumbai and Delhi hotels the public areas, lobby and restaurants are under renovation. In Calcutta in addition to the above, they are also refurbishing 1,100 rooms.
    • In terms of occupancy rates, there has been an improvement in luxury hotel occupancy rates in the 2QFY01 by 3% YoY.

      Luxury hotels occupancies up
      Occupancy rates (%) 1QFY01 1QFY00 2QFY01 2QFY00
      Taj Luxury Hotels 57.0% 49.0% 57.0% 54.0%
      Taj Leisure Hotels 37.0% 48.0% 38.0% 38.0%
      Taj Business Hotels 52.0% 59.0% 53.0% 63.0%

    • IHCL has raised room tariffs in its major hotels in the range of 5%-10% starting October 2000. This augurs well for average room rates for the rest of the year.
    • The company will be spending Rs 500 m for its information technology initiative over the next three years. This will encompass its central reservation systems, customer information services, web based initiatives and executive information systems. It aims to increase the overall productivity and achieve higher customer satisfaction.

    As there has been an improvement in luxury hotels in the 2QFY01, the future prospects look good. These hotels contribute to 80% of the IHCL's profits.

    Luxury hotels ARRs looking up in 2Q
    ARR (Rs) 1QFY01 1QFY00 % change 2QFY01 2QFY00 % change
    Taj Luxury Hotels 5,612 6,199 -9% 5,443 5,301 2.7%
    Taj Leisure Hotels 2,030 1,841 10% 1,703 1,750 -2.7%
    Taj Business Hotels 2,840 2,500 14% 2,808 2,494 12.6%

    On the whole the company expects occupancy rates to further improve in the 2HFY01, as this is the peak season for the industry. Also average room rates are expected to be better in the 2H.

    On the current price of Rs 195, IHCL is trading at 7.8x FY00 EPS of Rs 25.1.



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