Indian Hotels Company Limited underperformed in the March quarter (Q4FY22), with revenue per available room (RevPAR) being a major disappointment. RevPar is an important performance indicator for the hospitality industry. RevPAR of the company, on standalone basis, at 6,176, an increase of nearly 27% year-over-year (year-over-year) from the higher average room rate. However, it fell 18% sequentially as businesses were impacted by the Omicron wave in the early part of Q4. “We were surprised by the weak Q4FY22 results for Indian hotels as it meant Omicron’s impact was greater than expected. We had expected an impact of about a fortnight in January 2022, but the results indicated that January 2022 was completely washed out,” analysts at Nirmal Bang Institutional Equities said in a report.
However, on Thursday, the stock closed with a gain of about 5 percent on NSE. 247. Investors seem pleased with the company’s upbeat outlook on demand.
see full image
According to the management, the demand for leisure is going well, and with people returning to the office, the demand for corporate travel and events is also expected to pick up. RevPAR will reach pre-Covid levels once demand returns in its three key markets Delhi, Bengaluru and Mumbai. Management said, the estimated recovery in RevPAR in Delhi, Mumbai and Bengaluru in April 2022 was 121%, 118% and 102% respectively.
In addition, the company’s continued focus on deleveraging is positive. Management said that the money raised through qualified institutional placement and rights issue 3,982 crore to be used to repay debt of Indian hotels 450 crore and debt of subsidiaries 620 crores. The company’s presentation shows that as of April 27, from these earnings, Indian Hotels’ debt 2,052 crore has been paid. Management told analysts that the remaining funds would be deployed to grow the operations of its existing business.
“Management’s focus on increasing inventory through contracting, strong growth in new business segments such as Cummins, Ama and Chambers, strengthening balance-sheets through fundraising, and healthy business recovery in international markets for sustainable future earnings growth.” signals well for,” said. Archana Gude, Mid-Cap Analyst at IDBI Capital Markets & Securities.
Note that the company aims to expand operations using an asset-light model.
He added that inflationary cost pressures could pose a threat to operating margins in the near term, but the company is well prepared to pass on the incremental cost to protect margins.
Meanwhile, the stock hit an all-time intraday high of Rs. 260.30 on NSE on April 13. A meaningful bounce from current levels will depend on the pace of further debt reduction and development plans.