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Indian Hotels Company

Indian Hotels Company - Results Highlights.

The revenues and margins are strictly not comparable on a year-on-year basis, as the operating revenues include Rs26.36 crore of insurance claims for loss of profit on Taj Mahal Palace & Tower, which was non-operational due to damages sustained during 26/11 terrorist attacks.

The operating revenues declined by 12.3% year on year (yoy) to Rs456.6 crore due to substantial drop in occupancies and subdued average room rates (ARRs) yoy. The management clarified that despite the economic slowdown their ARRs and occupancy rates were holding good, however post 26/11 there have been significant cancellations and the month of December played a spoilsport for Q3FY2009 results. The occupancy rate in December 2008 dropped to 50% against 74% in December 2007 and 67% in April-November 2008. ARRs for the month were lower by 15.4% yoy.

Consequent to subdued top line performance the operating margin declined from 47% in Q3FY2008 to 36.3% in Q3FY2009, which is broadly in line with our expectation. The operating profit declined by 32.3% yoy to Rs165.6 crore due to operating leverage.

Consequent to the bleak macro environment for the hotel industry the company has reviewed its capital expenditure (capex) plans and announced that it would limit its routine capex and not undertake any new uncommitted projects. The management highlighted that it will limit its capex to existing expansions, which are underway in IHCL and group companies and will focus on early completion of these projects.

The company has raised Rs300 crore via non convertible debentures, as the 6 crore warrants allotted to promoters and convertible at Rs150 per share (amounting to Rs904crore) are unlikely to be converted.