Panoramic ambition

PENNY WISE

Panoramic Universal, a small-cap hotel company with four hotels in India, five in the US and one in New Zealand has been in the news for its expansion plans. The company plans to add assets worth over Rs 1,000 crore over FY09-FY11. This will take Panoramic Universal's current capacity from 965 rooms to nearly 1,800 rooms.

To achieve this, it plans to acquire two operational hotels, one each in Hyderabad and Panvel and turn them into 4-star hotels. It will set up three more greenfield projects "� a 3-star and a 5-star hotel in Kerala and a jungle resort in Goa. 

COMFORT ZONE
Rs crore	FY07	FY08E	FY09E
Revenue	133.20	180.00	235.00
OPM (%)	45.30	41.10	41.00
NPM (%)	24.60	22.20	21.30
EPS (Rs)	25.30	31.00	8.3*
* post-equity dilution

Finally, it also plans to develop a 3-star hotel along with a commercial complex in Jaipur. It is also considering acquisition of additional land in Jaipur to develop an integrated township at an investment of around Rs 3,000 crore.

In addition, the promoter group has a 5-star and a 3-star hotel project in Pune and a hotel in Thane and Durgapur each, which the management plans to consolidate into Panoramic against an issue of equity.

Panoramic also has an information technology division, which it intends to use in-house, to develop a travel, ticketing and hotel bookings portal which will also take its hotel bookings online. The portal is expected to be launched during the second quarter of FY09. It recently acquired a travel agency in India and the US each, and expects this division to clock revenues of Rs 30 crore this fiscal.

To fund its expansion plans, Panoramic has planned a rights issue (Rs 55 crore), an institutional placement (Rs 200 crore) and a GDR issue (Rs 250 crore), which is likely to take its equity from the current 1.3 crore shares to around 6 crore shares.

At Rs 112, the high margin business is valued at price-earnings multiple of 13.4 times estimated FY09 earnings, factoring in the forthcoming dilution. This is in line with its larger peers.

Besides, it still has to unveil its plans to fund the Jaipur township. Although execution risks loom large, there appears to be little downside, if the company sticks to its promises and its existing business continues to grow at 20 per cent y-o-y.