Re: {LONGTERMINVESTORS} Re: Indian Hotels Co Ltd - BSE Code: 500850 | NSE Symbol: INDHOTEL - Indicative Pice 62 - 02/07/2012 - Discussion Thread
RAJESH DESAI
PFA
IHCL posts lower standalone net
Our Bureau
Mumbai, Aug. 8:
Indian Hotels Company Ltd (IHCL) reported a lower net profit of Rs 4
crore on a standalone basis for the quarter ended June 30. This was
due to initial gestation period and the cost of a new hotel recently
opened in Bangalore, foreign currency fluctuation loss and lower
treasury income.
It had posted a net profit of Rs 21 crore in the corresponding quarter
last year.
The total income of the company, which owns and operates the chain of
Taj hotels and resorts, was Rs 396 crore for the April-June quarter
against Rs 370 crore for the corresponding quarter of the preceding
year.
Announcing the results, Raymond Bickson, Managing Director, said that
the sector continues to face pressure on demand due to the current
economic environment, which in turn had kept the room rates subdued
below desired levels.
On a consolidated basis, the company reported a loss of Rs 33 crore
for April-June quarter against a loss of Rs 22 crore in the same
period a year ago.
The share price of IHCL was up 0.74 per cent at Rs 60.90 on the BSE on
Wednesday.
nivedita.ganguly@
thehindu.co.in
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CA. Rajesh Desai
Rajesh Desai
The Tata Group has claimed that it had invested money in building the landmark Taj Mansingh hotel in central Delhi to bail out the property's owner, the New Delhi Municipal Council, which had failed to complete the hotel in time for a global conference in 1978, and was hopeful that "over the long term, we will get it straightened out". (ET)
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CA. Rajesh Desai
Rajesh Desai
DDA extends lease for Taj Palace Hotel to Tata group hospitality major IHCL for 25 years
NEW DELHI: Tata group hospitality major Indian Hotels Company (IHCL) today said lease of its Taj Palace Hotel in the city has been renewed for 25 years from April 1 this year."The Indian Hotels Company Limited ( Taj Group) is pleased to confirm that it has received the consent from the Delhi Development Authority (DDA) confirming renewal of the license for the Taj Palace Hotel, Sardar Patel Marg, New Delhi for a further period of 25 years effective from April 1, 2013," the company said in a statement.
The Taj had originally entered into an agreement for the construction and license of the hotel with DDA for 30 years effective from April 1, 1983. The Taj will thus continue to operate the hotel till March 31, 2038, it added.
Commenting on development IHCL Managing Director Raymond Bickson said: "IHCL has enjoyed a very cordial and beneficial business association with Delhi Development Authority over the past three decades and this recent development will further strengthen our partnership with DDA in the years to come."
IHCL and its subsidiaries are collectively known as Taj Hotels Resorts and Palaces.
DDA set to renew Taj Palace lease for 25 yrs
Development authority said to have passed Taj's file to Delhi lieutenant governor for approval
DDA and Taj group had locked horns over the method of rent calculations.
DDA claimed several items, including staff food, income from the shopping arcade, telephone recoveries, banquet income, service charges, etc, had not been included in gross receipts by the company, thereby bringing down the annual licence fee amount payable.
While DDA has maintained that it needs to reconcile these issues, with the deadline approaching fast, the civic authority is keen to resolve the matter.
LEASE TANGLE
- Taj Palace, New Delhi: Lease with Delhi Development Authority expires on March 31, 2013. Both parties were in arbitration over licence fee calculation since 1997
- Taj Mahal, New Delhi: Lease with New Delhi Municipal Council expires on October 31. The property will be put up for auction by the council
- Taj Mahal, Mumbai: Lease with Mumbai Port Trust expired in 2002. Matter is subjudice
- The lease agreement for the Taj group’s Indian Hotels Company (IHC) to continue its luxury Taj Palace Hotel (pictured) in the city seems set for renewal.
A senior Delhi Development Authority (DDA) official said the finance department had cleared the company’s file, and there was no reason why the lease could not be renewed. “There is no default by the Taj Palace hotel on financial matters,” the civil authority has said.
The lease agreement with DDA ends on March 31.
It is learnt DDA has processed the file and passed it on to the Lieutenant Governor of Delhi, Tejendra Khanna, who is also the chairman of DDA, for approval. The renewal will give Taj Palace, Dhaula Kuan, in southwest Delhi, a lease of 25 more years.
DDA is also willing to strike a compromise with the Taj group on an arbitration matter covering the hotel, which has been on for 16 years. According to DDA, the arbitration would not be a hurdle in the renewal of the lease, as the differences between the two parties were of an “academic nature.”
The Taj group had signed a 30-year pact with DDA on April 1, 1983, for Taj Palace. Taj’s agreement with the New Delhi Municipal Council for the Taj Mahal Hotel, popularly known as the Taj Mansingh, in the city, ends in October. The hotel company’s lease for its flagship Taj Gateway property in Mumbai has also run its course and is currently under litigation in the Bombay High Court.
Speaking to Business Standard earlier on the matter of lease renewals, Raymond Bickson, chairman and managing director of the IHC, had said, “We are prepared. We have been partners for many years.”
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CA. Rajesh Desai
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CA. Rajesh Desai
Rajesh Desai
Delhi HC rejects Indian Hotels plea to stay Taj Mansingh auction
New Delhi Municipal Corporation owns the land and had leased it out to Indian Hotels in 1976 for a 33-year period
The Delhi High Court has rejected the plea by Indian Hotels to stay auction of Taj Mansingh, a news channel reported.Indian Hotels, part of the Tata Group, had filed an injunction suit against New Delhi Municipal Corporation (NDMC) as the latter had proposed auctioning the property on which the iconic Taj Mansingh hotel is built. The corporation owns the land and had leased it out to Indian Hotels in 1976 for a 33-year period.
The lease of the hotel land ended in October 2011 but was extended by a year. The two follow revenue-sharing model for the property. In the suit, Indian Hotels said that NDMC and the company has a joint-venture based on revenue-share and has a right to seek an extension of the lease.
In case NDMC goes ahead with the auction of the land, Indian Hotels would have to match the highest bidder in order to continue operating the hotel.
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CA. Rajesh Desai
Rajesh Desai
Indian Hotel Company’s (IHC's) arm, Taj Group is planning to open 'Taj' and 'Vivanta by Taj' in Kunming, the capital and largest city in the Yunnan province in South-West China. With this initiative, the entity aims to enable the hospitality major gain more than a toehold in the Chinese market. The company had signed an agreement with the Yunnan Tourism Company in January 2012 to construct, develop, operate and manage two hotels in the Kunming Expo Garden.
IHC, which runs the Taj Group of hotels, has decided to invest in a Taj Hotel, with approximately 200 rooms, and a Vivanta by Taj Hotel, with approximately 300 rooms, in the Kunming Expo Garden in the Yunnan province.
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CA. Rajesh Desai
Rajesh Desai
Dear Sir, Madam
Indian Hotels company Ltd announced its Q4FY13 and FY13 results on 30th May, 2013.
Quarterly Performance (Standalone): The standalone results which form ~55-60% of the consolidated results arrived at net sales of INR555.83 crore, which was flat on YoY basis, but up marginally by 2.07% on QoQ basis. The EBITDA for the quarter was INR166.79 crore, which was up by 4.77% and 10.165 on YoY and QoQ basis. The net profit (including the exceptional item) was at loss of INR338.9 crore, which was almost 5 times down on YoY and QoQ basis. However. The net profit excluding the exceptional item was at INR85.81 crore, which was up by 29% on YoY and QoQ basis.
Note: Exceptional item represents diminution in the value of the investments in select entities. It includes an amount of INR305 crore of diminution in company’s investments in Taj International hotels (HK) Ltd, which in turn holds investments in company’s various international entities including Orient express Hotels Ltd. In addition, a diminution of INR68 crore, which has been recognized in the company’s investments in Bjets Pte Ltd. The company has also created a provision of INR27.55 crore, to satisfy the obligations of Bjets Pte Ltd, an associate company, currently under restructuring. An amount of INR23.11 crore has been accounted towards a satisfactory settlement of a dispute that was under arbitration for over 25 years.
Annual performance (Consolidated): The company arrived at consolidated net sales of INR3743.36 crore, which was up by 8.71%. The EBITDA for the quarter was INR537.64 crore, which merely down by 1.405. The net profit excluding exceptional item was INR 0.19 crore, which was down 96% .
|
Indian Hotels Co. Ltd Q4FY13 Standalone Results |
Consolidated Annual Performance | |||||||
|
Particulars |
Q4FY13A |
Q4FY12A |
Q3FY13A |
YoY(%) |
QoQ(%) |
FY13 |
FY12 |
YoY(%) |
|
Net Sales |
555.83 |
560.15 |
544.55 |
-0.77% |
2.07% |
3743.36 |
3443.52 |
8.71% |
|
Other Operating Income |
0 |
0 |
0 |
|
|
0 |
0 |
|
|
Total Operating Income |
555.83 |
560.15 |
544.55 |
|
|
3743.36 |
3443.52 |
|
|
Total Expenditure |
389.04 |
400.96 |
393.14 |
|
|
3205.72 |
2898.27 |
|
|
EBITDA |
166.79 |
159.19 |
151.41 |
4.77% |
10.16% |
537.64 |
545.25 |
-1.40% |
|
EBITDA Margin (%) |
30.01% |
28.42% |
27.80% |
159bps |
221bps |
14.36% |
15.83% |
(147)bps |
|
Other Income |
9.6 |
10.95 |
6.1 |
|
|
60.16 |
71.38 |
|
|
Operating Profit |
176.39 |
170.14 |
157.51 |
|
|
597.8 |
616.63 |
|
|
Depreciation |
31.45 |
31.89 |
30.49 |
|
|
288.42 |
255.07 |
|
|
PBIT |
144.94 |
138.25 |
127.02 |
|
|
309.38 |
361.56 |
|
|
Interest |
26.76 |
30.58 |
25.21 |
|
|
170.74 |
212.47 |
|
|
Exceptional Items |
-424.71 |
-1.11 |
-1.5 |
|
|
-430.43 |
-1.52 |
|
|
PBT |
-306.53 |
106.56 |
100.31 |
|
|
-291.79 |
147.57 |
|
|
Tax |
32.37 |
41.35 |
35.69 |
|
|
98.96 |
121.75 |
|
|
PAT |
-338.9 |
65.21 |
64.62 |
-619.71% |
-624.45% |
-390.75 |
25.82 |
-1613.36% |
|
Minority Interest |
0 |
0 |
0 |
|
|
-40.86 |
-38.4 |
|
|
Shares of Associates |
0 |
0 |
0 |
|
|
1.37 |
15.64 |
|
|
Consolidated PAT |
-338.9 |
65.21 |
64.62 |
-619.71% |
-624.45% |
-430.24 |
3.06 |
-14160.13% |
|
PAT Margin (%) |
-60.97% |
11.64% |
11.87% |
(7261)bps |
(7284)bps |
-11.49% |
0.09% |
(1158)bps |
|
PAT excluding Excep Items |
85.81 |
66.32 |
66.12 |
29.39% |
29.78% |
0.19 |
4.58 |
-95.85% |
|
PAT Margin (%) |
15.44% |
11.84% |
12.14% |
360bps |
330bps |
0.01% |
0.13% |
(12)bps |
|
|
|
|
|
|
|
|
|
|
|
Equity Capital |
80.75 |
75.95 |
80.75 |
|
|
80.75 |
75.61 |
|
|
Face Value |
1 |
1 |
1 |
|
|
1 |
1 |
|
|
No. of Outstanding shares |
80.75 |
75.95 |
80.75 |
|
|
80.75 |
75.61 |
|
|
|
|
|
|
|
|
|
|
|
|
EPS |
-4.20 |
0.86 |
0.80 |
-588.81% |
-624.45% |
-5.33 |
0.04 |
-13265.16% |
|
EPS excluding Excep Items |
1.06 |
0.87 |
0.82 |
21.70% |
29.78% |
0.00 |
0.06 |
-96.12% |
|
Adjusted EPS excluding Excep Items |
1.06 |
0.82 |
0.82 |
29.39% |
29.78% |
0.00 |
0.06 |
-95.85% |
|
Source: Company Data, Microsec Research. All data in INR crores unless specified. | ||||||||
Regards,
Team Microsec Research
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CA. Rajesh Desai
Rajesh Desai
"There are three major triggers which have gone unnoticed by market and it is going to be very price sensitive once the company actually notifies this. If one checks the US SEC website it shows that Orient Express Hotel has no open offer right now. It has been removed because the Orient Express actually rejected bid from Indian Hotels. So technically if one is not making an open offer then the stock gets punished for that particular reason," he said.
"Second interesting thing is how US SEC actually works on open offer. It is not an infinite period offer where one can think of revising it. It has a six months window if the target company rejects the bid price. So what technically happens is after six months window one needs to notify the same thing that needs to be revise it or not. Since six months plus three months of grace period has also been removed, so considering that this could be a huge speculating activity. The provision says that the company which is trying to acquire, the target company will not be able to make an open offer at least for next 24 months. That means the entire Orient Express saga is over which will be taken very positively by shareholders."
"So at current levels we feel July 17 will be the date which should be informed from Orient Express Hotel that no such bid has actually been revised for and that will see a huge short covering in this particular stock. So for this particular month we are suggesting that one can go for a buy call by buying 50-55 Call Options and waiting for the news to come in. This will be a very handsome risk-reward and even from medium term perspective those who are long holders in the stock they should be looking for a target of Rs 67."
"Rs 2-2.5 Call Option can give you at least five-seven times in the current series itself once the July 17 actually go and we do not see any counter offer under any circumstances for this stock. Indian Hotels is having a key value of less than Rs 50 lakh for its properties and any three or four star property that analyst work will give them a valuation of at least Rs 95 lakh to Rs 1.2 crore. So under any circumstance this is an asset based theory where we feel the first target of Rs 67 is likely achievable from short to medium term perspective."
CA. Rajesh Desai
Rajesh Desai
Mistry Hotel Spinoff to Cut Debt as U.S. Grows: Corporate India
Investors in Indian Hotels Co. (IH), the unprofitable owner of New York’s Pierre hotel, say the company should sell part of its overseas business to trim its debt pile and focus on reviving growth at home.
The luxury chain controlled by Tata Sons Ltd. had 38.18 billion rupees ($602 million) of debt as of March, according to data compiled by Bloomberg. The company, with 22 resorts from the U.S. to Mauritius, reported a loss of 191 million rupees for June quarter as costs increased and said it plans to spin off its foreign holdings by March.
Average room rates at the Pierre hotel in New York, seen here, gained for the first time in three years in the 12 months ended March 31, according to company data. Photographer: Daniel Acker/Bloomberg
A stake sale will allow Chairman Cyrus Mistry to exploit reviving growth in the U.S. even as India’s $1.8 trillion economy expands at the slowest pace in a decade. The depreciation of the rupee, Asia’s worst performing currency this year, may lure overseas tourists to the nation’s heritage sites such as the Taj Mahal, helping boost revenue at the nation’s hotel operators, according to Krishnakumar Srinivasan, head of equities at Sundaram Asset Management Co.
“We would like them to focus on their Indian assets rather than overseas assets, which have been a drag on the balance sheet,” said Nilesh Shetty, an associate fund manager with Quantum Asset Management Co., who added to his holding of Indian Hotels last month. A stake sale “will help unlock value of those assets, de-leverage and improve liquidity.”
The company is working on a restructuring plan to move all its overseas assets into a “step-down subsidiary” and estimates to complete revamping the business by March, Anil Goel executive director for finance at Indian Hotels told reporters on August 12. He didn’t elaborate.
Pierre Rates
Average room rates at the Pierre hotel in New York gained for the first time in three years in the 12 months ended March 31, according to company data. Tariffs rose 4.2 percent to $623, data show. Rates at the company’s Campton Place hotel in San Francisco increased 16.2 percent and St. James Court in London by 15.2 percent in the past two years.
In the U.S., retail sales rose in July for a fourth consecutive month, showing American households are regaining momentum as employment climbs. Banyan Tree Holdings Ltd. to John Pritzker, the billionaire son of Hyatt Hotels’s founder, are betting a revival in the world’s biggest economy will boost travel demand.
Europe Growth
Blackstone Group LP, the largest manager of private-equity real estate funds, has decided to sell its London West Hollywood hotel in California for $195 million, according to a person with knowledge of the deal, while Banyan Tree, a Singapore-based operator of spas and resorts, is seeking to expand its presence in Europe and the Americas.
Pritzker purchased the remaining 50 percent stake in closely held Commune Hotels and Resorts for an undisclosed amount earlier this month.
A report by the European Union’s statistics office in Luxembourg said Aug. 14 that gross domestic product in the 17-nation euro area rose 0.3 percent last quarter after shrinking 0.3 percent in the previous three months. The growth brought to a close six straight quarters of contraction -- the longest stretch since the euro’s debut in 1999.
“There is definitely a big improvement in the U.S. and Europe too is looking better,” said Chennai-based Srinivasan. “If a hotel property has a niche and some kind of a comparative advantage, it will definitely find appetite with private equity and strategic investors overseas.”
Indian Hotels shares 0.9 percent in Mumbai as of 12:17 p.m. to 43.25 rupees, paring this year’s loss to 31 percent, versus the 5.3 percent decline in the benchmark S&P BSE Sensex.
Changing Strategy
Mistry is changing strategy from aggressively pursuing acquisitions to “consolidate” the group’s assets, said A.K. Prabhakar, senior vice president of equity research at Anand Rathi Financial Services Ltd.
Former Chairman Ratan Tata sought to expand the group by offering to acquire Orient-Express Hotels Ltd. (OEH), owner of New York’s 21 Club restaurant and the Hotel Cipriani in Venice. The proposal was rejected by Orient-Express in November, saying the bid undervalued the company.
“Your opportunistic proposal was made at a time when the price of Orient-Express shares has been significantly depressed,” the Hamilton, Bermuda-based company said in a letter to Indian Hotels. “Our board has unanimously concluded that your proposal significantly undervalues Orient-Express, and that now would be a highly disadvantageous time to sell.
The Tata group company offered a premium of 43 percent to Orient-Express’s 20-day average price then. Indian Hotels owns 6.9 percent of Orient-Express.
Final Call
Goel said the board has not taken a final call on whether it wants to pursue Orient-Express with a higher offer.
The hotel operator, which runs the 112-year-old Taj Mahal Hotel in Mumbai, narrowed its group loss for the June quarter to 190.9 million rupees from 333.6 million rupees last year on higher sales and lower finance costs. The company’s finance costs fell 10 percent to 393.7 million rupees, data show.
The company is looking to sell stakes in its overseas assets to pare debt and bolster earnings to counter the ‘‘dismal performance of the domestic business,” said Sumant Kumar, a Mumbai-based analyst with Elara Securities (India) Pvt., who upgraded his recommendation for the stock to buy on Aug. 13. “This will change the game for Indian Hotels. It will be a huge positive.”
Indian Hotels has opened two new hotels with 175 rooms in India since April and plans to add 1,575 rooms across 12 domestic properties by March next year, according to an Aug. 12 company presentation. Another 1,553 rooms are planned for the year ending March 2015 in Asia’s No. 3 economy, it added.
India Plans
The oversupply of Indian hotel rooms, which increased 24 percent in the year through March and lagging behind demand by 3 percentage points, isn’t deterring the company from building more, Raymond Bickson, managing director of Indian Hotels said at a briefing on May 30. India has 200,000 rooms versus 5 million in the U.S., which has a smaller population, and 3 million in China, according to Bickson.
“India is outpacing the growth of many other economies,” he told reporters. “We still need a lot of convention facilities, hotels, rooms to keep up with that.”
The rupee has crashed about 28 percent to 63.42 per dollar in the past two years, the biggest tumble since the government pledged gold reserves in exchange for loans from the International Monetary Fund in 1991. UBS AG is predicting that a drop to 70 is possible.
That will have a “positive rub-off” on the domestic operations of companies that run luxury hotels and resorts, according to Sundaram’s Srinivasan.
The hotel industries average luxury room rates slipped 18 percent in the four years through 2012, while a brutal gang rape in New Delhi last year deterred women visitors.
“The earlier strategy helped in scaling up the business while the current strategy will help them in making the business profitable,” said Prabhakar. “It seems the wise thing to do.”
To contact the reporter on this story: Bhuma Shrivastava in Mumbai at bshriv...@bloomberg.net
Rajesh Desai
Indian Hotels Company
Recommendation: Hold
Price target: Rs61
Current market price: Rs42
Domestic performance subdued, consolidated performance better
Result highlights
Q1FY2014-subdued operating performance at stand-alone level: Indian Hotels Company Ltd (IHCL) posted a subdued operating performance at the stand-alone (domestic) level in Q1FY2014. The revenues were flat and the operating profit declined by around 20% year on year (YoY). The net sales stood flat at Rs396.6 crore, largely in line with our expectation of Rs390.5 crore. The flat sales can be attributed to seasonal weakness along with flat occupancies and lower year-on-year (Y-o-Y) average room rentals (in the wake of an uncertain macro-economic environment and large room supply). With power & fuel and other operating costs remaining higher on a Y-o-Y basis, the operating profit margin (OPM) declined by 320 basis points YoY to 13.5%. The operating profit declined by 19.2% YoY to Rs53.4 crore. However, an increase of around 3x in the other income resulted in a 37.2% Y-o-Y growth in the adjusted profit after tax (PAT) to Rs14.3 crore (ahead of our expectation of Rs2.7 crore) in Q1FY2014.
Better operating performance at consolidated level: Despite a weak performance at the stand-alone level, IHCL posted a better performance at the consolidated level with a single-digit growth in the revenues and a flat OPM YoY. This gives us an indication that the international properties have started posting a better performance. The consolidated net sales grew by 6.6% YoY to Rs908.7 crore. The OPM stood flat at 11.7% and the operating profit grew by 4.8% YoY to Rs106.4 crore. The higher other income and lower interest cost helped the company to post some profit (of Rs0.5 crore) at the adjusted profit after tax (PAT) level in Q1F2014 as against a loss of Rs9.7 crore in Q1FY2013. The reported loss after the minority interest and the share of profit from associates was down to Rs19.1 crore in Q1FY2014 from Rs33.4 crore in Q1FY2013. We believe that if the international properties continue to post a better operating performance, we might see IHCL posting a better operating performance at the consolidated level in FY2014.
Business fundamentals remains under pressure in the domestic market: The foreign tourist arrival in India during the period of April-June 2013 grew by just 1.9% YoY to 12.8 lakh tourists as the period is seasonally weak for tourism in India. The room supply in Q1FY2014 grew by 20% YoY while the demand for rooms increased by 17% during the same period. This put pressure on the occupancies and average room rates (ARRs), which declined by 2% and 3% respectively during the quarter. We believe IHCL's occupancies must have stood flat at close to 60% while its ARRs may have declined by 3-4% YoY in Q1FY2014. We believe Q2FY2014 will be the weakest quarter and don't expect any recovery in the performance at the operating level in this period.
H2FY2014 would give us a better picture: The second half of FY2014 will give us a much better picture as it is seasonally strong for the hotel business in India. If the government implements some constructive actions and the macro-economic uncertainties clear in the coming quarters, we might see a better performance in the second half of FY2014. Also, the rupee's depreciation against the dollar and the other major international currencies would be favourable for the tourism industry in India.
Maintain Hold: We have broadly maintained our earning estimates for FY2014 and FY2015. At the current market price the stock trades at 26.0x its FY2015E consolidated earnings per share (EPS) of Rs1.6 and enterprise value (EV)/room of Rs0.5 crore. In view of the near-term uncertainties hovering over the industry, we maintain our Hold recommendation on the stock with a price target of Rs61. However, we are confident that IHCL would be a key beneficiary of the improving business fundamentals in the domestic as well as international markets in the medium to long term.
CA. Rajesh Desai