Indian Hotels: Don't check in yet
http://www.business-standard.com/common/news_artic [2008-7-7]
Tag : Indian Ginger
Revenues for Indian Hotels, in the March 2008 quarter, grew just 10per cent over Q4FY07, though lower licence fees and otherexpenditure helped push up the operating profit margin by a smart270 basis points to 44.7 cent. Consolidated net profits for2007-08, fell 4 per cent to Rs 355 crore due to higher expenses oninterest.
Revenues, however, increased a reasonably good 16 per cent to Rs2,920 crore and the operating margin too was up a handsome180 basispoints to 30.5 per cent. Average room tariffs for Indian Hotels(stand-alone) increased byabout 15.6 per cent last year to Rs 10,674. Rates have been comingoff in cities such as Bangalore and Hyderabad though other citiescontinue to see rates moving up. However, none of the top eight cities has seen an increase inoccupancies during FY08 and five have actually seen a fall-forIndian Hotels they were flat at 73 per cent.
Industry watchers believe that with coming in, tariffs could beunder pressure and estimate that while ARRs may climb by about 10per cent in the current year, but fall in the following year. Over the next three to four years, Indian Hotels plans to add 6,000rooms to its inventory of over 10200 rooms. New hotels are comingup in Bangalore, Chennai and Trivandrum and the budget chain Gingerwill see 11 new hotels opening. Some of the projects, however, arebelieved to be running 6-12 months behind schedule. The company also plans to explore management contracts overseas,especially in the Middle East and the Americas.
Investments over the next couple of years could mean higherinterest costs for Indian Hotels and could pressure margins in thenear term, though it has mopped up Rs 1400 crore through a rightsissue. The stock has come off sharply and the current price of Rs77, it trades at 11 times estimated FY09 earnings. While that is not expensive, given that earnings could slow down inthe wake of falling room revenues and occupancies, investors mightwant to wait for lower levels.
Revenues for Indian Hotels, in the March 2008 quarter, grew just 10per cent over Q4FY07, though lower licence fees and otherexpenditure helped push up the operating profit margin by a smart270 basis points to 44.7 cent. Consolidated net profits for2007-08, fell 4 per cent to Rs 355 crore due to higher expenses oninterest.
Revenues, however, increased a reasonably good 16 per cent to Rs2,920 crore and the operating margin too was up a handsome180 basispoints to 30.5 per cent. Average room tariffs for Indian Hotels(stand-alone) increased byabout 15.6 per cent last year to Rs 10,674. Rates have been comingoff in cities such as Bangalore and Hyderabad though other citiescontinue to see rates moving up. However, none of the top eight cities has seen an increase inoccupancies during FY08 and five have actually seen a fall-forIndian Hotels they were flat at 73 per cent.
Industry watchers believe that with coming in, tariffs could beunder pressure and estimate that while ARRs may climb by about 10per cent in the current year, but fall in the following year. Over the next three to four years, Indian Hotels plans to add 6,000rooms to its inventory of over 10200 rooms. New hotels are comingup in Bangalore, Chennai and Trivandrum and the budget chain Gingerwill see 11 new hotels opening. Some of the projects, however, arebelieved to be running 6-12 months behind schedule. The company also plans to explore management contracts overseas,especially in the Middle East and the Americas.
Investments over the next couple of years could mean higherinterest costs for Indian Hotels and could pressure margins in thenear term, though it has mopped up Rs 1400 crore through a rightsissue. The stock has come off sharply and the current price of Rs77, it trades at 11 times estimated FY09 earnings. While that is not expensive, given that earnings could slow down inthe wake of falling room revenues and occupancies, investors mightwant to wait for lower levels.
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