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C. Raja Rajeshwari

SHAREHOLDERS can hold on to the TajGVK stock as it holds room for appreciation. The stock has appreciated by about 50 per cent since the earlier buy recommendation, when the stock traded at Rs 55 (Business Line, July 27). The stock now trades at 10 times its trailing 12-month earnings per share. Strong growth prospects, good fundamentals and the backing of "The Taj" brand name are reasons to consider fresh exposure in the stock, but at lower levels.

Better days ahead: The firm revival in the hospitality sector is gauged from the encouraging numbers of most of majors such as Indian Hotels, EIH and Asian Hotels. This is also mirrored in TajGVK's first-half results: Topline rose 24 per cent and bottomline 30 per cent.

Arrivals (mostly business travellers) into India pushed occupancy rates to above 60 per cent even in the normally lean period. Average room rates (ARR) tend to rise on raching occupancies of about 60 per cent. The uptrend in occupancies is expected to accelerate in the coming quarters due to heightening of business activity. In addition, tourism promotion by the Government would result in better turnout.

High-end operator: TajGVK is a joint venture between Indian Hotels (which owns "The Taj" brand) and the GVK group. The company operates one luxury hotel — Taj Krishna — and two business hotels — Taj Banjara and Taj Residency — in Hyderabad. With these, the company has captured most of the high-end demand with very few competitors. The information-technology hub Hyderabad attracts foreign business travellers who are, generally, more price-inelastic than domestic travellers, which would mean better realisations. The company looking beyond Hyderabad for opportunities should help it de-risk its business. It has acquired a five-star hotel in Chandigarh from the India Tourism Development Corporation. The property is now under renovation and is set to open in 2004-05. However, the benefits of this venture are likely only in the next financial year.

State Govt efforts: The Andhra Pradesh Government's efforts to strengthen its infrastructure should help the hospitality sector. The Government's focus on leisure tourism by creating eco-tourist spots and water sports augurs well for hotels in the State. These initiatives are positives from the hospitality industry's perspective; being the major player in Hyderabad, TajGVK is set to capitalise on these developments.

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