Indian Hotels Q4 net profit up 71 per cent
Livemint — June 20, 2007

Indian Hotels Company Limited (IHCL), owner of the Taj Group of hotels, on Tuesday said profit after tax for the quarter ended March was Rs135 crore, up 71 per cent compared with Rs79 crore a year ago, on the back of higher room rates and strong occupancy. Revenues rose 45 per cent to Rs539 crore from Rs371 crore a year ago.

The company’s profit rose 75 per cent to Rs322 crore from Rs184 crore in year-ago period. Revenues rose 40 per cent to Rs1,619 crore from Rs1,155 crore, as the international expansion of the Taj in the US brought in higher room yields in cities such as San Francisco and New York.

The Indian Hotels stock price rose by 1.80 per cent to close at Rs146.15 on the Bombay Stock Exchange while the exchange’s benchmark index Sensex rose 1.53 per cent to close at 14,295.5. The company now manages a portfolio of 81 hotels with 9901 rooms. The Taj Group, including managed hotels, generated a group turnover of Rs3,834 crore worldwide.

Five subsidiaries were merged with the parent last year, which boosted both sales and net profits for the quarter as well as the full year. “The company has outperformed our expectations with its operating profit margins nearing 40 per cent for the first time on the back of lower license fees. We expect the company to continue to perform well and have a buy on the stock with a target price of Rs170 over the next one year,” says Amol Rao, research analyst, Infinity.com Financial Securities Ltd, a Mumbai-based brokerage firm.

“The good results are despite occupancies in cities such as Bangalore, Delhi, Chennai and Hyderabad falling and significant investments which we made in re-energising and re-positioning the Taj brand in the international market,” says Anil Goel chief financial officer, IHCL. “Even in cities where occupancies have declined in India, we believe the situation will change within months and room rates will rebound,” says Ajoy Misra, senior vice-president, sales & marketing, IHCL.

According to hospitality consultants HVS International, revenue per available room for five-star deluxe hotels in India increased about 117 per cent to Rs5,289 in fiscal 2006 from fiscal 2002. A gap between demand and supply in India’s hotel sector over the last few years has led to strong profits and revenue for companies across the sector such as Indian Hotels, ITC Ltd, a diversified company that owns a large hotel division, and EIH Ltd, which manages the Oberoi chain of hotels.

Indian Hotels revenues were approximately 72 per cent higher in fiscal 2007 than EIH Ltd’s Rs938.97 crore. Indian Hotels net profit of Rs322crore was over 60 per cent higher in the same period than EIH Ltd’s Rs200.45 crore. “In India we will grow our business at all price points — high-end luxury, five-star hotels, four-star gateway hotels and the Ginger brand of budget hotels. In the international markets however, we will only look at high-end luxury hotels re-entering markets with prize assets in iconic locations. Our US and UK operations will drive our international presence, even as we protect our turf in India and enhance our share of the market,” says Goel.

The company, which had gone slow on the roll out of Ginger hotels, intends to double the eight-hotel budget chain network this year. It also claims to have enough land bank to develop 25-30 such budget properties in all.

IHCL is still looking for partners to off load up to 49-per cent equity in the Campton Place Hotel acquired in San Francisco six weeks ago.