The Rs 5,960 crore ITC Ltd has drawn up an ambitious 10-year plan which pegs profits from the hotels business alone at a hefty Rs 500 crore. The company expects its hotels business to contribute about 50 per cent of ITCs profits by that time, against the current 17 per cent of pre-tax profits. Accordingly, ITC will pump in a whopping Rs 1,100 crore over the next five to six years in the hotels business.
Top-level ITC sources told Business Standard that ITCs current profits from the hotels business, including both ITCs own business and that of its subsidiary ITC Hotels Ltd, stands at about Rs 100 crore. Viewed against ITCs pre-tax profits of Rs 587 crore, it is already a substantial contributor to the total kitty. But the idea is to expand the hotels business further, and become one of the biggest players in the sector. This is in line with ITCs overall corporate plan, which envisages staying in those areas where it sees itself as a market leader.
The profits figure would take into account both ITCs direct activities and those earned through its subsidiary.
The funding for the plan would come essentially from cash surpluses and borrowings, said sources.
The investments would be in greenfield projects and acquisitions, which would be made both directly by ITC and through ITC Hotels.
``Other than tobacco, the cash surpluses generated by ITC would also go into hotels, ITC sources said, underscoring the importance of hotels in ITCs overall gameplan.
In 1996-97, ITCs operating cash flow generation shot up 100 per cent, from Rs 488 crore to Rs 969 crore. These generations will aid the investment plan.
The rationale for ITC is simple: hotels is the first greenfield venture for ITC, which it started through the Welcomgroup chain in 1975. ``It is a business we have been in for the past 20 years and have learnt how to manage well, the ITC sources explained, adding that the hotels business will become even more important for the company in future.
The company is keen to aggressively invest in the hotels business, where setting up new hotels takes time. ITC was earlier unable to pump mega investments into the business as its majority shareholder, the UK-based BAT Industries, was not too keen on the idea. But ITC has now decided to go ahead with major investments. ``We have not been able to pump in large funds into the business so far. But we will do so now, said ITC sources.
There is also a distinct possibility of ITT Sheraton of the US, with whom ITC has a marketing tieup, picking up an equity stake in ITC subsidiary ITC Hotels Ltd, to mark a greater involvement with the company.
Sources said Sheraton has not approached ITC yet, but something concrete could emerge by the end of the year. ITT Sheratons only partner in India is ITC.
ITC Hotels manages three ITC-owned properties, Maurya Sheraton Hotels and Towers in New Delhi, Mughal Sheraton in Agra and Chola Sheraton in Chennai.
ITC plans to set up new hotels across the country and double the room capacity to 5,000 from the present 2,400 by the end of the five year period. New hotels by the ITC-Welcomgroup chain will be set up in Mumbai, Calcutta and Jaisalmer. Work on the Mumbai deluxe hotel has already commenced and the hotel is expected to be ready by 1999-2000, the sources said. In Calcutta, the hotel is expected to be constructed within the next three years. An additional tower is also being constructed at the Maurya, which has been the clear revenue leader in the capital for the past six years.
Gearing up for growth
10-year plan pegs profits from the hotels business at Rs 500 crore Rs 1,100 crore to be pumped into hotels over the next 5-6 years
Greenfield projects to be set up Acquisitions to be made both directly and through ITC Hotels Operating cash flow surpluses and borrowings to fund investment Closer ties with ITT Sheraton of the US in the offing
In 1996-97, ITCs operating cash flow generation shot up 100 per cent, from Rs 488 crore to Rs 969 crore. These generations will aid the investment plan.
The rationale for ITC is simple: hotels is the first greenfield venture for ITC, which it started through the Welcomgroup chain in 1975. ``It is a business we have been in for the past 20 years and have learnt how to manage well, the ITC sources explained, adding that the hotels business will become even more important for the company in future.
The company is keen to aggressively invest in the hotels business, where setting up new hotels takes time. ITC was earlier unable to pump mega investments into the business as its majority shareholder, the UK-based BAT Industries, was not too keen on the idea. But ITC has now decided to go ahead with major investments. ``We have not been able to pump in large funds into the business so far. But we will do so now, said ITC sources.
There is also a distinct possibility of ITT Sheraton of the US, with whom ITC has a marketing tieup, picking up an equity stake in ITC subsidiary ITC Hotels Ltd, to mark a greater involvement with the company.
Sources said Sheraton has not approached ITC yet, but something concrete could emerge by the end of the year.
ITC Hotels manages three ITC-owned properties, Maurya Sheraton Hotels and Towers in New Delhi, Mughal Sheraton in Agra and Chola Sheraton in Chennai.
