Indian Hotels shares slide 5% post Q4

Shares of Indian Hotels Company (IHCL), a hospitality arm of Tata Group, dropped over 3% in early trade on Thursday, a day after the company released its fourth quarter earnings reports. The parent firm of Taj Hotels also declared a dividend of ₹1.75 per share of ₹1 each for the financial year 2023-24, subject to approval at the forthcoming Annual General Meeting of the company.

Reacting to Q4 numbers, shares of Indian Hotels declined as much as 5.1% to ₹577, while the market capitalisation dropped to ₹82,870 crore on the BSE. Early today, the Tata group stock opened lower at ₹600 against the previous closing price of ₹608.25, snapping two sessions gaining streak. In the past two days, the stock rose nearly 4%.

Post Q4, domestic brokerage Motilal Oswal sees an upside potential of 12% in IHCL and reiterates a ‘Buy’ rating on the stock, with a target price of ₹680. The brokerage expects the strong momentum to continue in FY25, led by an increase in average room rate (ARR) due to healthy demand, asset management strategy (upgrades in hotels), and corporate rate hikes.

Earlier this month, IHCL touched its 52-week high of ₹622.25 on April 4, 2024, rebounding 85% from its 52-week low of ₹336.60 hit on April 28, 2023. The largecap stock has given decent returns in the last one year, rising nearly 72% in 12-month; 50% in six months; and over 2% in a month. In the calendar year 2024, the counter gained nearly 34%.

For the fourth quarter ended March 31, 2024, Indian Hotels, India’s largest hospitality company, reported 27.43% growth in consolidated net profit at ₹418 crore as compared to ₹328 crore in the same period previous year, marking eight consecutive quarters of record performance.

The consolidated revenue rose 18% to ₹1,951 crore, from ₹1,625 crore in the corresponding period last year, led by growth in room revenue and  in food and beverage.

On the operating front, EBITDA grew 25% year-on-year (YoY) to Rs 706 crore, while the margin improved by 2 percentage points to 36.2%.

For the full year, the net profit grew 26% YoY to ₹1,259 crore, and the revenue rose 17% to ₹6,952 crore, led by a 19% growth in room revenue and 12% in food & beverage. The company’s EBITDA jumped 20% YoY to ₹2,340 crore, while the margin was up 1% to 33.7%.

As per the company, IHCL outperformed the industry on domestic same store revenue per available room (RevPAR)  with a premium of 65% versus competition. “Demand buoyancy in the international portfolio led to an occupancy of 67%, an expansion of 700 basis points resulting in a RevPAR growth of 9% over the previous year.”

“IHCL achieves its key goals under Ahvaan 2025 well ahead of time with a full year consolidated EBITDA margin of 33.7%, a portfolio of 300+ hotels and a cash position of ₹2,206 crore. Q4 FY24 marked eight consecutive quarters of record financial performance driven by double-digit revenue growth in same store hotels, incremental revenue from not like for like hotels and scaling of new businesses,” says Puneet Chhatwal, Managing Director & CEO, IHCL.

“With 53 signings in FY24, IHCL achieved a portfolio of 310 hotels, enabled by attaining scale in each of our brands and forming strategic alliances in new market segments,” he adds.

IHCL’s new business vertical comprising of Ginger, Qmin, amã Stays & Trails, The Chambers (membership fee) and TajSATS reported a revenue of ₹1,588 crore. The new business clocked a growth rate of 35% over the previous year, which was double of core IHCL Enterprise which grew at 17%. The new business now accounts for 12.1% share of IHCL Enterprise revenue, an expansion of 140 bps from 10.7% in the previous year.

Meanwhile, the management fee income grew by 18% over the previous year at ₹470 crore, reflective of IHCL’s asset light strategy.

Chhatwal further says that IHCL will continue to deliver double digit revenue growth with new businesses at 30%, and opening of 25 hotels in FY25. The company plans to introduce the re-imagined Gateway, a full-service hotel offering in the upscale segment, to capture growth opportunities in emerging micro markets in metros and Tier II and Tier III cities.

In the April-June quarter of the fiscal 2025, the brand will commence 15 hotels with launches in Bekal and Nashik, followed by destinations like Bengaluru, Thane and Jaipur. It aims to scale up to a 100 hotels portfolio by 2030. Currently, IHCL has a portfolio of 310 hotels including 92 under development globally across 4 continents, 13 countries and in over 100 locations.

“Investing in our competitive advantage of optimising the balance between operating leverage and fee-based business, IHCL has commenced a five-year capital deployment plan from FY2023 to FY2027 totalling ₹3,500 crore towards key asset upgradation, building capabilities and select new projects, " he adds.

The company plans to strengthen its digital capabilities with new brand website launches starting May 2024, and implementation of a new ERP system and Data Lake for advanced analytics with artificial intelligence (AI) and machine learning (ML) capabilities.

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