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Deeptha Rajkumar

REPORTS of a sharp recovery in occupancy rates and ARRs or average room rate, saw the stock of Indian Hotels gain momentum on Tuesday, hitting new highs intra-day, on both the BSE and NSE.

Brokers said that reports of a 16-odd per cent jump in tourist arrivals for the season, served as a positive trigger for hotel stocks. A rumour, that Indian Hotels is almost `booked out' for the period October-March, aided in sustaining interest in the counter.

"Last one and a half years was event ridden — Sept9/11, SARS etc — but this year the industry is looking at a more stable period. A rise in business confidence and improvement in the company's economic outlook is also said to be boosting business travel this year, which augurs well for the industry. In fact there are already signs of a significant pick up in both leisure tourism and business visits," market sources said.

According to analysts, the interest at this counter is more of a growth play. "The occupancy rates for the 1QFY04 was around 60 per cent, however, the company is looking at a sharp rise in ARRs by the end of the fourth quarter of FY04. Going forward, its decision to take up hotel management contracts and shift to `asset light strategy' (its efforts to sell of its non-core properties) are the key growth drivers for the company," Mr Abhijeet Kundu of Pioneer Intermediaries said.

However according to Mr Dilip Bhutt, head of research at Prabhudas Liladher, it is a hold and wait story. "Though attractive at the current valuations, the stock has already run up considerably. Hence, the upside will be restricted in the short term. And even in terms of financial performance, one cannot expect any spectacular turnaround," he said.

The stock ended the day at Rs 295.45 up 7.32 per cent with around 2.11 shares traded on the NSE. On the BSE it closed at Rs 294.60 up 7.01 with around 1.65 lakh shares traded.

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