The annual results, announced late on Thursday, didn’t disappoint, as earnings before exceptionals and taxes jumped 49.4 per cent. This was possible mainly because of a 19 per cent reduction in interest cost and a flat trend in depreciation charges.

In fact, operating profit rose just seven per cent, with margins falling around 50 basis points. Last year’s results include the financials of Taj Lands End for the period from October 2002 till March 2003, and since this division just about managed to break-even, it impacted overall margins. Leaving out Taj Lands End, profitability would improve marginally.

But even the seven per cent increase in operating profit and the four per cent rise in revenues (excluding revenues of Taj Lands End) is a reasonable achievement, considering that last year had the dual impact of travel advisories around the September quarter and the Iraq war in the March quarter.

Needless to say, both events led to a reduction in international tourist traffic, but the company made up by focusing on domestic tourists. Occupancies jumped to 61 per cent, compared to 56 per cent in FY02, while sales of food and beverage rose 17 per cent.

The fourth quarter results, however, were a mixed bag. Although revenues grew seven per cent (excluding Taj Lands End), operating margins fell by over 300 basis points even after adjusting for the one-time expenditure of Rs 3.5 crore on centenary celebrations. Again, the inclusion of the results of Taj Lands End would be responsible for much of this decline in profitability.

Besides, staff costs were higher owing to a wage revision in some hotels, while power costs because of an increase in power tariffs. Nonetheless, RevPAR (revenue per available room = average room rate x occupancy rate) continued to increase, which is a healthy trend, especially since average room rates (ARR) were 12 per cent lower than year ago levels.

Barring any unforeseen calamities, the current year should be a much better one for the company, as the upward trend in occupancy rates is expected to be maintained. Besides, the company expects ARRs to gradually improve from the June quarter onwards. Additionally, the removal of the 10 per cent expenditure tax in this year’s budget will play a big role in improving profitability.