Tata group company Indian Hotels, which owns the Taj chain of luxury hotels, posted a decline of 22 per cent in net profit for the quarter ended December 31 at Rs 64.9 crore, mainly on account of poor recovery in the international markets where the company operates and also due to the non-functional premier rooms of the Taj Mahal Palace and Tower, Mumbai.
The company had recorded a net profit of Rs 83.85 crore in the same quarter a year earlier. Its stock closed 6.1 per cent lower at Rs 90.80 on the Bombay Stock Exchange (BSE), as against its Monday close of Rs 96.70.
Income from operations for the quarter was also lower at Rs 422.3 crore, a two per cent decrease when compared to Rs 430.3 crore in the corresponding quarter a year earlier.
The last month of the third quarter is considered the most busy for the hospitality sector, with both leisure and corporate travel hitting new highs. In December 2009, most premier hoteliers posted more than 75 occupancy without a substantial rise in room rents.
Anil P Goel, executive director - finance, IHCL said:”Whilst there are visible signs of recovery in India, many of the key international markets in which the company has a presence or from where the company’s customers originate are yet to recover.”
The hotel sector witnessed an overall improvement in occupancies across most key markets during the quarter, driven by improved demand, cutting across major customer segments. However, total income for the quarter was adversely impacted because of the closure of 287 rooms in the Palace Wing of Taj Mahal Palace & Tower, Mumbai, undergoing renovation after the November, 2008 terrorist attack. These are expected to resume full operations in early May, 2010.
A portion of the net profit was contributed by other income such as Rs 15.6 crore from the insurance company for business interruption and damage to property in the terrorist attack.
However, the results are better when compared to the second quarter of this year, when the company reported a profit of just Rs 11.9 crore, a decline of 76 per cent over the corresponding quarter a year earlier.
Further, the company also stated that it finalised a bond issue of Rs 700 crore, with a coupon of two per cent per annum and a yield to maturity of 9.5 per cent per annum, with an average tenure of seven years. The funds are being utilised by the company to specifically retire some offshore debt in its international subsidiaries.
Also, the company clarified that it had made an important restructuring to its investment in ELEL Hotels and Investment, which owns the defunct Sea Rock hotel in Bandra, Mumbai.
IHCL has shifted its investment in ELEL into a special purpose vehicle for strategic reasons, leading to a restructuring of its holding in ELEL, a subsidiary of Delhi-based Claridges, which was 85 per cent when it bought the stake for Rs 680 crore in June last year. IHCL, however, did not specify the actual impact on its holding.
“IHCL will continue to be fully involved with the design and development of the proposed convention centre/hotel on the site. IHCL has the option to take this asset back on its balance sheet in three years time. The important issue is that the asset continues to be under the ownership of the Taj Group and developed under the guidance of IHCL”, stated a spokesperson.
ELEL holds a long term sub-lease for the land on which the 400-room Sea Rock hotel is located. The hotel was bombed in 1993 and has been non-functional since. IHCL recently started demolishing it.
