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Indian Hotels Co Ltd’s pipeline of over 7,500 rooms at the end of FY12 is likely to be supported by a sharp revival in demand on the back of growth in leisure travel, corporate events and business conferences. The pipeline is spread across brands like Taj, Selections, Vivanta and Ginger. In the last financial year, the company added 1,156 operating rooms, taking the total number to 20,581 by the end of FY22.

As of now, FY23 is poised to outperform. Analysts expect standalone occupancy to reach/exceed pre-Covid or FY2010 levels of 67% in FY13. It was around 53% in FY22. Also, the standalone average room rate, which was 9,717 in FY22, is expected to improve amid rising demand.

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International travel as well as overseas operations contributed about 19% of the consolidated operating revenue of Indian hotels in FY12.

The company, in its recently released annual report, said that the business performance in April 2022 is better than in April 2019. “April/May ’22 revenue for Indian hotels is up 10% over pre-Covid levels and with a continued pickup in leisure as well as business travel, we expect FY23E revenue and FY24E revenue to be 104% higher than pre-Covid levels. -Covid (FY20) has 122%. ICICI Securities analysts said in a report on June 22. Consolidated FY20 revenue stood at Rs 4,463 crore.

In addition, remote working has given rise to emerging trends such as work (work and vacation), which is prompting hotels to offer homestays as it is witnessing a surge in demand. Indian Hotels is expanding its presence in this segment under the brand name of M Stage & Trails. As of the end of FY 2012, this portfolio consisted of 80 am bungalows, of which 47 homestays were in operation.

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The annual report of Indian Hotels reiterates its goals under the Ahwaan 2025 strategy. It aims to take the total hotel portfolio count to over 300 and achieve a 50:50 ratio between owned/leased and managed hotels. The number of operational hotels stood at 175 at the end of FY 2012. The company is focused on growing the asset-light portfolio and growing through management contracts.

Analysts at Motilal Oswal Financial Services said, “Its asset-light model and new and innovative revenue-generating avenues, along with high Ebitda (earnings before interest, taxes, depreciation and amortization) margins, return on capital employed It’s good to expand.” 22 June report

As part of the Ahwaan strategy, it plans to achieve consolidated EBITDA margin, which includes 35% of EBITDA share from management contracts and new businesses, along with other income of 33% by FY26. This is supported by cost-control efforts, such as a 5% reduction in corporate overheads as a percentage of consolidated revenue for FY16 from 8% in FY16. For FY20 and FY22, Ebitda margins stood at 24% and 17.4%, respectively.

Indian Hotels also aspires to maintain a net cash balance sheet. The company was net-debt-free as on March 31, helped by funds raised through the qualified institutional placement route and rights issue. However, not everything is hunky-dory. The re-emergence of Covid cases in business and tourism hubs like Mumbai and Kerala will boost demand. In case of severe disruption in operations, the development plans of Indian hotels are likely to backfire.

Also, higher inflation levels are a cause for concern as it may result in lower discretionary spending. In addition, margins may be impacted as training and recruitment costs will increase with increasing demand.

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For now, investors are factoring in a stronger outlook as shares have gained 23.7% so far in CY22, compared to a 12% decline in the Nifty 500 index.

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