The Indian Hotels Company Ltd, which owns and operates the Taj chain of hotels and resorts, will set aside around ₹400 crore in its standalone profit and loss statement for the year ending March 31, and ₹100 crore in its consolidated statement for erosion of investment value.
The company said the decision came after it undertook a year-end review “to evaluate the need for a temporary diminution in the value of its long-term investments” given the “sustained depression in the macroeconomic and market environment”.
In a communication to the exchange, IHCL said the review was undertaken with regard to the anticipated future performance of the investee companies. IHCL said long-term investments “have witnessed a decline in fair value and consequent erosion in net worth.”
With the economic uncertainty expected to continue over the medium term, “it has had an impact on the downward revision of projected cash flow expectations from some affected investments”.
For the quarter ended December 31, IHCL recorded a 20 per cent increase in consolidated net profit at ₹59.5 crore compared to ₹49.7 crore in the same quarter last year. Consolidated income from operations during the quarter rose 10 per cent to ₹1,167 crore (₹1,060 crore). IHCL’s shares remained unchanged at ₹69.90 on the BSE.
Speaking to Business Line , officials reiterated that the review did not have any bearing on the company earlier booking losses of ₹373 crore on investments in Orient-Express Hotels (OEH) Ltd, and a second write-off of ₹365 crore.
In November, IHCL had decided not to pursue its $1.8-billion offer to acquire OEH, a luxury chain of hotels. IHCL continues to own 6.9 per cent of Orient-Express Hotels.
A company official said, “the non-cash provision is with regard to other IHCL investments, and is primarily related to the depressed environment, internationally and at home.”