Indian Hotel Q3 net dips 23%

Our Bureau Mumbai | Updated on January 31, 2011

A file photo of the Taj Hotel in Mumbai.

Absence of insurance towards business interruption and one-time expenditure on brand and promotional activities dragged down Indian Hotel Company's third quarter net profit by 23 per cent to Rs 50 crore in the third quarter ended December 31, 2010 against Rs 65 crore in the same period last year.

‘Other operating income' component of Rs 15.57 crore present in the quarter ended December 31, 2009 is absent for the quarter under review . This represents insurance claim accrued towards compensation for business interruption for which Taj Mahal Palace Hotel, Mumbai, was covered for a period of one year, said a company statement.

The flagship property of the company, Taj Mahal Palace — one of the targets of the terror attacks of November 26, 2008 – was closed for renovation and commenced operations in August 2010.

New launches

During the quarter, the company also launched one of its luxury properties – Taj Falaknuma Palace in Hyderabad after an exhaustive restoration, said the statement. Expenses related to the launch of its upper-up scale brand Vivanta by Taj in September 2010 also followed through the December quarter.

However, the total income of IHCL went up by 11 per cent to Rs 485 crore in the period under review against Rs 438 crore last year.

“Industry trends globally have been quite strong. Recovery in Asia, especially India has been faster compared to other countries. In 2010, occupancies have gone back to the year 2008 levels. There has been a moderate growth in average room rates as well with leisure destinations like Goa, Agra and Kerala growing quite substantially,” said IHCL's Managing Director, Mr Raymond Bickson.

Room addition

With regard to addition of new rooms in the coming year, the company will be adding 2,556 rooms in 2011-12. IHCL has 108 hotels with 12,849 rooms. Internationally, the Tata Group company will be opening one property each in China and Morocco in 2012.

IHCL's capital expenditure for the next 15-16 months will be around Rs 300 crore in two green-field ventures one in Dwaraka and the other in Guwahati.

“For the Dwaraka property Rs 100 crore has already been paid out and Rs 200 crore payout will be done in the next 15-16 months.

This property is slated to open in first half of calendar year 2013. For the Vivanta property in Guwahati we have a capital commitment of Rs 100 crore,” said IHCL's Executive Director (Finance), Mr Anil P. Goel.

Retirement of Debt

The company plans to bring down its present consolidated debt of around Rs 4,300 crore to Rs 3,500 crore by September 2011, said Mr Goel. This will be done by the money raised through a preferential allotment of shares to its main promoters – Tata Sons Ltd.

In October 2010, IHCL had said it will be raising around Rs 850 crore in two tranches through a preferential allotment to Tata Sons. The entire capital raised will be used for the retirement of debt.

Indian Hotels Company's shares closed down 2.29 per cent at Rs 89.65 on Monday against Friday's close of Rs 91.75.

Published on January 31, 2011

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