• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

C. Raja Rajeshwari

LONG-TERM investors can invest in the stock of TajGVK Hotels and Resorts, as it would offer a good exposure to the uptick in the hotel industry. The company, a joint venture between the Tatas and the GVK group, is getting a boost from the surge in tourist and business, Budget sops, Andhra Pradesh's tourism promotion and the revamping of infrastructure. Indian Hotels (IHCL) has a 25.5 per cent stake in the company. The stock, which trades at Rs 52, is relatively low valued vis-à-vis other hotel stocks such as of EIH, Indian Hotels and ITC Hotels.

Narrowing demand-supply: TajGVK Hotels owns three hotel properties in Hyderabad with 520 rooms. Increased demand from foreign (business) visitors, infrastructure-led demand (easy access to local tourists) and delay in setting up of some of the proposed hotels have narrowed the supply-demand gap leading to improved revenue per available room for luxury hotels in Hyderabad. The company runs the properties in three price classes and has been cashing in on the demand.

With Hyderabad emerging as a major information technology destination, the demand for rooms has been on the rise. The Taj synergy: Indian Hotels manages the operations of all the three hotels under the Taj brand — Taj Krishna, Taj Bandra and Taj Residency. Indian Hotels is now focussing on becoming asset-light, owning less properties. This means that some of its future undertakings would be owned by its subsidiaries or by way of joint ventures. This shift augurs well for TajGVK Hotels, as it might own properties in other places.

Recently, TajGVK purchased the Chandigarh property of India Tourism Development Corporation. The company is likely to invest Rs 50 crore in completing the project. The acquisition is significant as TajGVK, which operates star hotels at Hyderabad, now becomes a multi-location hospitality company.

In addition, the growth in income, over and above the industry average, is largely due to synergies of operating three hotels at three different tariff bands in vicinity.

Tourism promotion: According to the Andhra Pradesh Tourism Development Corporation, Hyderabad consistently got over five lakh tourists every month in 2002. In terms of international travellers during 2002, Andhra Pradesh attracted 2.1 lakh tourists, with June, July and December receiving peak traffic, according to official statistics.

The AP governments' efforts to create alternative eco-tourist spots, beef up existing facilities and start water sports would augur well for the hotels in the State. The state is also participating in major international fairs, through advertisements and promotional campaigns. The completion of the Hyderabad international airport should remove some bottlenecks and open the doors to more business travellers.

Taking into account the improved business prospects, increased tourists arrivals, the backing of Indian Hotels and strong fundamentals, long-term investors can contemplate entering the stock at the current levels.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Raipur Alloys and Steel — To be cast away

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line