• JANUARY 20, 2000

Indian Hotels reports dismal results

IHCL (Indian Hotels Company Ltd), reported a dismal performance for the 3QFY2000 as its net fell by 21% YoY to Rs 332.8 m. Its operating income reported a marginal improvement of 2% from Rs 1646.8 m in 3QFY99 to Rs 1676.9 m in the 3QFY2000.

IHCL, India's largest hotel chain reported a turnover of Rs 5,915 m in FY99. It currently operates 42 hotels in India under the "Taj' brand.

(Rs m) 3QFY2000 3QFY1999 Change
Operating Income 1,676.9 1,646.8 2%
Other Income 6.8 10.0 -32%
Expenditure 1,152.0 1,050.8 10%
Interest 54.2 11.8 359%
Depreciation 85.7 79.8 7%
Profit before Tax 391.8 514.4 -24%
Tax 59.0 93.6 -37%
Profit after Tax/(Loss) 332.8 420.8 -21%
Net profit margin (%) 20% 25%  

The other key highlights of the results was interest expenses which went up by 359% YoY in the 3QFY2000. Interest expenses were up mainly due to additional borrowings for funding of acquisitions and new hotel projects. Additional costs like performance linked bonus and customer loyalty programmes also added to its operating expenditure which went up by 10% YoY over the corresponding period The operating margins have fallen to 31.7% in the 3QFY2000 from 36.8% in the 3QFY99.

The hotel industry continues to reel under lacklustre occupancy rates and pressure on average room rates. IHCL's 3Q earnings did not receive a boost from millenium celebrations. The five star hotels in metro cities have been badly hit by the economic downturn due to slowdown in business travel. IHCL which receives around 75% of its revenues and profits from its hotels in Mumbai and Delhi has suffered as a result of this. We do feel however that occupancy rates will pick up in future as the country has got a stable government in place and industry is showing signs of a pick up.

Market View:
Hotel stocks have been out of favour for the past two years as a result of a fall in occupancy rates. IHCL however continues to be a long term favourite of analysts due to its large hotel network, aggressive expansion plans, professional management and its sound financials.

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