India Hotel is clear turn around bet according to me, Co evolving with new age products under leadership of Mr Chatwal
Aggressively adding Room Keys without much Capex
Reducing Debts
Improving Operating Margins
My Presentation on IHCL at one of my Investor’s Group Meeting few months back.
Views Welcome
Presentation IHCL.pptx (940.1 KB)
Some more read-up on Indian Hotels moves ot be leaner and light.
I fail to see how stocks such as these can consistently trade at a substantial premium to Book Value (adjusted for increase in value of owned land). If you see the ROCE on average across the whole cycle, it is actually less than the cost of capital. Even ROCE in 2007, which was the all time peak of this business so far, is about 15-16%, hardly great numbers for any business, let alone a capital intensive cyclical business at the peak of its upcycle.
What is the rationale for paying 3-4x Book for such a business? A Motilal Oswal research report estimated the value of the freehold land of IHCL to be about ~2000 cr, if you account for that, the company should be trading at a multiple of 1.5x Book to Today’s value. What am I missing here?
Very informative interview of Indian Hotels CEO.
The government will introduce one-month e-visa and make charges flexible, with fee for summer months — non-peak months for tourism — kept less than the rest of the year.
Leisure tourists will be charged $10 for a 30-day e-visa for travel between April and June, and $25 for any other month, Union Tourism Minister Prahlad Patel announced on Tuesday. Currently, India charges $80-100 for one-year e-visa for tourists from most countries.
It is a risk to invest in companies with low ROCE / ROE. Decades go by and such companies don’t show any significant growth due to their industry or business model.
Q2FY20 results
Revenue up 4.6%, EBITDA up 57%. Gross debt of 2355cr vs 2326cr on March 31, 2019. Operating cash flow of 254cr vs 202cr in H1FY19
EBITDA for Q2 at Rs. 182 crores highest, in the last 10 years
EBITDA margins for Q2 FY at 17.65%, highest in the last 10 years, vs 11.81% last year. Operating EBITDA margin expansion (Pre Ind AS) by 1.16%. Focus on cost optimization – corporate overheads, RM costs, HLP cost. Consistent margin expansion achieved in the preceding six quarters
Signs a record 14 hotels with an inventory of approximately 2000 rooms in the first half of this year
Opens 4 hotels (Taj Hotel & Convention Centre, Agra; Cidade de Goa; Ginger Dwarka and Ginger Sanand) in H 1 this year and on track to open 12 hotels for FY 19-20
Commenting on the performance, Mr. Puneet Chhatwal, Managing Director and Chief Executive Officer, IHCL said, “In line with Aspiration 2022, IHCL has now consistently delivered on all key metrics in the last six consecutive quarters. The Company signed a record 14 hotels without any investment, across all its brands. It also is a matter of pride that two iconic Taj Hotels made it to the World’s Ten Best Hotels.”
The company signed 6 bungalows to Ama Stays & Trails across multiple locations, including new leisure destinations. It also opened two charming villas in Candolim, Goa
In line with offering our guests a re-imagined experience, IHCL partnered with Ab InBev, the world’s leading brewery, exclusively to launch a chain of premium microbreweries within its marquee hotels across key locations in India. This industry first partnership will jointly invest Rs. 150 crores over the next 5 years, with plans to open 15 microbreweries. The first microbrewery is slated to open at Taj MG Road, Bengaluru by March 2020
20% of the Ginger portfolio has now been repositioned in the lean-luxe segment
The Company relaunched its iconic business club, The Chambers, and the new value proposition will offer a host of enhanced privileges and benefits
IHCL announced the launch of its new salon brand, niu&nau. The unisex salons will present a re-imagined experience. The first niu&nau opened at Taj Lands End. The brand will be introduced at 10 more locations by the end of 2020
In keeping with our commitment to develop talent for the future, IHCL partnered with two leading international institutions – Les Roches in Switzerland and ESSEC in France – for scholarship and development programmes
Ginger announced the ‘Ginger Leadership Program’ in partnership with the Institute of Hotel Management-Aurangabad (IHM-A) to enable IHM-Aurangabad students to accelerate career growth
Investment in a Hotel in Pune
The Board, at its meeting dated April 30, 2019, had approved an Investment Framework arrangement with Government of Singapore Investment Corporation (GIC) to acquire hotels in India. The equity commitment for The Indian Hotels Company Limited (IHCL) for such acquisition was approved at 30’½>, with Balance 70% equity funded by GIC. The Framework arrangement was executed in May, 2019.
In furtherance of the above framework, the Board at its meeting held on November 11 2019, approved the acquisition of a hotel in Pune, subject to the requisite due diligence for a total consideration of upto Rs. 108 crores plus applicable taxes and transaction costs, within the GIC framework, under which:
■ IHCL will make an equity investment of an amount up to Rs. 20 crores (representing 30% of equity) for purchase of the Hotel in Pune and issuance of corporate guarantee if required for any debt in the company;
■ The acquisition will be made by the IHCL-GIC JV Company.
Acquisition of stake in ELEL Hotels & Investments Ltd
The Board of Directors at its meeting held on November 11, 2019, subject to signing of definitive agreements, approved the proposal to purchase the balance 14.28% stake in ELEL Hotels and Investments Ltd, a subsidiary, from Claridgcs Hotels Pvt Ltd and Excalibur Ltd for a consideration of Rs. 250 crorcs over a period of two years in a phased manner on achievement of set milestones by the end of December 2021.
@hitesh2710 has talked about some longer term patterns in Indian Hotels. On short timeframes, I see a flag breakout today. Target could be about 175-180 or so for this, but anyway if it crosses 160 convincingly, then move could be much bigger eventually
Motilal Oswal research report on Hotels industry and management strategy.
Puneet Chhatwal, MD & CEO of IHCL says ‘Have Achieved 50% of the 2022 guidance’. Adds that they don’t see much impact of #Coronavirus on the domestic front
@hitesh2710 ji good to see you respond on this thread. I have a quick question for you in terms of the competitive landscape in the hotel industry. For now, the only major competition seems to be from international players like Marriott, etc. But do you think that OYO rooms as well as Airbnb can crowd the hotel space in India?
It seems that because of The Taj brand, IHCL is in the premium category and will not be too affected by these ‘value’ players, however, because they are also entering the Value category with the Ginger brand, this might be a concern for them.
Disclosure: not invested, but following
Largest Hotel operator in India
They have signed 50 New Hotels in last 2 years under Management Contract
After Puneet Chhatwal became MD in 2018, company had embarked on Aspiration 2022 Programme, wherein targets were as follows
Restructure
Further management had indicated following:
The company had started to achieve most parameters when Covid hit
o Now focus has come back on survival and monetistion of Hotel Assets
Whatever one may say, it is hugely dependent upon international travellers , conferences by large companies and marriages -all 3 not coming back for at least next 6 months… and even after next 6 months…the return to normal would be gradual…so long wait for everyone who is invested here.
Spoke to the company in a conference call today. Here is a summary of the points they discussed
Indian Hotel Market review:
insightful report - thanks for sharing
Observed that the share price in 2006 was close to current price! Some basic questions to ponder.
Does it mean this share is dangerous for long term holding?
Is the Indian hotel business structurally a low ROCE business?
How have global hotel companies like Marriott, Hilton, Hyatt etc performed vis-a-vis IHCL?
Or is this a case of poor management performance only?
Even with the change at the top, what is the likely performance over long term?
Was studying hotel sector over the last few days, clearly they make low returns but things were starting to improve in last few years. The oversupply was getting absorbed before pandemic struck. However the way these companies and IHC in particular has cut costs gives me hope that come revenge travel, these companies will make huge cashflows. Secondly, they have learnt importance of multiple revenue streams, charging for all things like airlines. Finally lots of consolidation in the sector also on cards and can lead to asset light models. Not sure about long term value creation as of now but next 2years could be interesting.
The hospitality industry in India has witnessed enormous stress. The second wave has brought the restaurant, hotels and airlines to its knees.
In the short term, IHCL may become a beneficiary of expected GST rate cuts, other government schemes.
In the long-term, it looks poised for growth - as this company had analysed each cost item in the past 15-16 months, made the organisation leaner, took steps on the digital front and once travel returns it will be in a sweet-spot to capture all gains.
