Indian Hotels Q3 net up 28%; plans 13 hotels in FY14

Nachiket Kelkar
moneycontrol.com

Luxury hotels operator Indian Hotels' third quarter standalone net profit rose 28 percent year-on-year to Rs 65 crore, even as net sales grew at a slower 4 percent to Rs 545 crore.

"Profits for the quarter improved through a combination of better operating margins and reduction in financing costs," the company said.

Indian Hotels' finance costs declined to Rs 25 crore in Oct-Dec from Rs 31 crore in the year ago quarter. Also it had a lower exchange loss on long-term borrowings of Rs 1.50 crore compared with Rs 7 crore loss a year ago. In the year ago quarter, the company also had a exceptional loss of Rs 8 crore, which included shortfall towards a business interruption insurance claim.

The company also took some price hikes during the third quarter and feels it would be able to improve on that in the fourth quarter, which is typically a good quarter for the sector.

On a consolidated basis, the operator of the Taj Group of Hotels reported a net profit of around Rs 50 crore, up 2 percent year-on-year, while revenue rose 5 percent to Rs 1,060 crore.

"The sector continues to face pressure on demand due to the current economic environment in which, whilst room sales have grown in the aggregate across all key markets, the rates have continued to be plateaued," said Raymond Bickson, MD.

Indian Hotels currently has a consolidated debt of Rs 3,700 crore with a debt-equity ratio of 1.1:1. Its standalone debt stands at Rs 2,400 crore, with a debt-equity ratio of 0.60-1.

EXPANSION PLAN

Indian Hotels has so far opened 5 hotels and 509 rooms so far this financial year and will end FY2013 with 7 hotels and 757 rooms.

It has plans to open 13 hotels with 1,710 rooms in FY2014, Bickson said.

The new hotels will come up in Dwarka, Kolkata, Hubli, Chennai, Pune, Raipur, Gondia and Mumbai airport among other cities. Many of them will be management contracts, he added.

ORIENT EXPRESS HOTELS

Indian Hotels is reviewing its options with regards to the luxury hotels to train operator Orient Express. The Tata Group company currently holds about 6.9 percent of Orient Express' class A common shares.

It had bid to acquire the remaining stake in Orient Express in October last year, in a deal valued at USD 1.86 billion. Orient Express, however, rejected the bid in November.

"An offer like this can't be kept open indefinitely. So the board will take a call on what they would want to do within March 2013," said Anil Goel, ED - Finance.

MUMBAI PROPERTY LEASE

When asked about the dispute with the Mumbai Port Trust, with respect to the lease of Indian Hotels' flagship property -- The Taj Mahal Palace -- at Gateway of India, company officials said that they hope to resolve all issues amicably.
According to a report by Business Standard Newspaper, Mumbai Port Trust has sent Indian Hotels an eviction notice last year. Indian Hotels has in turn filed a suit in the Bombay High Court seeking lease renewal, the report stated.

"The lease is valid for 200 years (100+100). The other issues we will amicably resolve with the Port Trust...What happens is when you have a document that is 100 yrs old, when you regroup to discuss the way forward, there are bound to be certain differences of opinions, which we are sure will get resolved amicably," said Goel.

 Indian Hotels shares closed down 0.5 percent at Rs 61.65 on NSE on Monday. The results were announced after markets closed.

nachiket.kelkar@network18online.com