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The worst is behind us
Q3 was not as good as expected but it seems that the worst is now over. Pick up has started from the bottom of the market,
ie budget hotels. There is a visible improvement in rates and demand. Expect 9% growth in demand for industry. Overall,
India has a supply shortage but may have interim periods of oversupply in some micromarkets due to timing of build-out.
Situation in micromarkets: Delhi very good – peak volumes. North Mumbai doing very well, Bangalore picking up, Goa
very well, seasonality in Goa vanished. Rajasthan also good. Hyderabad, Pune, south Mombay not doing that well.
Indian Hotels has c40 projects in the pipeline. To date, it has nearly 13,000 rooms including international.
Company plans to deleverage balance sheet – has paid off USD debt by taking rupee debt, and migrated short term to long
term debt. Interest expense has declined. Equity has been infused by Tata Sons. Next year more infusion from warrant
conversion (INR4b). Debt likely to come down from INR44b to INR33b.
Capital expenditure will be funded from internal accruals. Need to spend INR500-600m per year as routine maintenance
capex. Two main projects are Dwarka Delhi – INR3b project, and Gauhati INR1b. Hotel Sea Rock housed in a SPV and
work will begin soon.
Payroll costs have gone up due to one-time hit on retiree benefits due to interest rate and salary hike assumption changes.
Moreover, results have been depressed by a one-time hit on launch of Vivanta brand and Falaknuma hotel.
International business: Under pressure due to entry into US. Targeting successful turnaround of the Pierre. Pierre is averaging
USD650 ARR (average room rent), ie a discount to comparable properties. Strategy is to increase occupancies of suites to get
room rates up. Boston averaging USD300, again at a discount to comparable properties. Need to get ARRs up there, too. The
company is losing USD20m PBT annually on US business right now. Breakeven in 12 months is expected.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The worst is behind us
Q3 was not as good as expected but it seems that the worst is now over. Pick up has started from the bottom of the market,
ie budget hotels. There is a visible improvement in rates and demand. Expect 9% growth in demand for industry. Overall,
India has a supply shortage but may have interim periods of oversupply in some micromarkets due to timing of build-out.
Situation in micromarkets: Delhi very good – peak volumes. North Mumbai doing very well, Bangalore picking up, Goa
very well, seasonality in Goa vanished. Rajasthan also good. Hyderabad, Pune, south Mombay not doing that well.
Indian Hotels has c40 projects in the pipeline. To date, it has nearly 13,000 rooms including international.
Company plans to deleverage balance sheet – has paid off USD debt by taking rupee debt, and migrated short term to long
term debt. Interest expense has declined. Equity has been infused by Tata Sons. Next year more infusion from warrant
conversion (INR4b). Debt likely to come down from INR44b to INR33b.
Capital expenditure will be funded from internal accruals. Need to spend INR500-600m per year as routine maintenance
capex. Two main projects are Dwarka Delhi – INR3b project, and Gauhati INR1b. Hotel Sea Rock housed in a SPV and
work will begin soon.
Payroll costs have gone up due to one-time hit on retiree benefits due to interest rate and salary hike assumption changes.
Moreover, results have been depressed by a one-time hit on launch of Vivanta brand and Falaknuma hotel.
International business: Under pressure due to entry into US. Targeting successful turnaround of the Pierre. Pierre is averaging
USD650 ARR (average room rent), ie a discount to comparable properties. Strategy is to increase occupancies of suites to get
room rates up. Boston averaging USD300, again at a discount to comparable properties. Need to get ARRs up there, too. The
company is losing USD20m PBT annually on US business right now. Breakeven in 12 months is expected.
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