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C. Raja Rajeshwari

INDIAN Hotels, which runs `The Taj' chain of hotels, has slowly recovered post 9/11 crises.

The Budget sops and company initiatives such as restructuring, strategic acquisitions, cost-cutting, renovations and brand-building hold room for growth.

From a medium-term perspective, the stock, trading at Rs 192, at a trailing 12-month price-to earnings multiple of 34 times, is a good option.

Shareholders can stay invested and investors can consider fresh exposure at lower levels.

Growth initiatives: To rationalise its hotel business, the group is merging various subsidiaries for better definition of business areas. There are 57 subsidiaries and associate companies. The company plans to bring this number to about 30 in due course of time.

The hotel chain has been contemplating divesting nine properties that have been identified as not measuring up to the standards of the Taj chain.

The company has already sold two properties — Taj Blue Diamond at Pune and Taj Residency at Lucknow — in January.

The company has also been focussing on growth by acquisitions. Following this decision, the group has acquired one of ITDC's properties in Chandigarh through its associate company Taj GVK Hotels and Resorts.

In addition, the acquisition of Regent Hotel at Bandra in Mumbai, renamed as `Taj Land's End', marks the company's much-awaited entry into the fast-growing North Mumbai market. In 2001-02, North Mumbai's demand for hotel rooms grew at 15 per cent.

The company is also planning to introduce a chain of budget hotels and four-star hotels in smaller cities — distinct from its Taj brand — where the potential for growth is immense.

Financials: For the quarter ended December 2002, the company posted a topline growth of 28 per cent to Rs 169 crore and a bottomline growth of 86 per cent to Rs 11 crore.

Room revenues contribute 47 per cent to the total revenues. Room occupancy in the luxury and business divisions was up at 71 per cent (56 per cent) for the third quarter ended December 2002.

However, in spite of an increase in room occupancy, the average room rates (ARR) were down 9.9 per cent in the luxury division and 3.8 per cent in the business division.

The `food and beverages' revenue stood higher at 42 per cent of the total revenues for the third quarter ended December 2002.

Concerns: Though the company has derisked its revenue model by focussing on food and beverages, close to 50 per cent of revenues is still derived from room occupancy.

The concerns that cloud the company's performance are lower average room charges and weak leisure demand.

The coming two quarters of the financial year would be normally subdued owing to the cyclicality of the business. Medium-term investors can consider taking exposures at lower prices.

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