Despite taking largest share of an Indian consumer’s wallet, Indian travel and tourism companies are grossly undervalued due to macro economic slowdown of past many years, significant presence of unroganised playars and oversupply issues in select segments.

The combined market capitalization of the sector including aviation as on October 24 stood at Rs 95,959 crore. This is much lower than valuation of even Bharti Airtel (Rs 1.2 lakh crore), which is expected to struggle after launch of Reliance Jio, and close to half of Hindustan Unilever and Maruti Suzuki (range of Rs 1.7-1.8 lakh crore).

According to a head of research of a foreign wealth advisory firm, hotels sector had oversupply problem and profitability was under stress. There are not too many listed players to fall into the travel category, he added.

“There are too many unorganized players in the travel and tourism sector unlike many other sectors in the consumption theme. Some big (travel) players are not even listed. For example, the large four listed paints companies comprise more than three-fourth of the industry size. But the large listed travel companies form only one-fourth the industry size,” said G Chokkalingam, founder, Equinomics Research and Advisory.

The different segments in the consumption theme are not strictly comparable though as some like fast moving consumer goods, telecom services, paints, consumer durables and textiles are lower ticket items compared to others like travel, tourism, jewellery and automobiles. Frequency and purpose of consumption is also different. Also demand for sectors like FMCG, telecom services paints and textiles is relatively more stable compared to highly discretionary segments like consumer durables and automobiles. Demand for travel and tourim and jewellery are most sacrificed in a downturn. But they all fall into one umbrella (Consumption) and all vie for the rising aspirations of Indian consumer and his wallet share. Hence the comparision.

While things are looking up in the hotels sector in terms of uptick in occupancy rates and average room rents due to increased travelling, they are unlikely to be close to the last bull run (2004-2007), said an analyst. Nevertheless, overall outlook of the sector is positive and profitability is expected to improve in the next 12-18 months, said analysts.

Outlook for aviation companies is also positive due to robust traffic growth and benefits of cheaper oil prices compared to past. Passengers carried by domestic airlines during January to September 2016 grew 23.2 per cent year on year as many airline companies partly passed on the benefits of lower input costs. Elara Capital is positive on prospects of companies like

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