Indian Hotels - Q2FY21 First Cut - ICICI Securities

(CMP: Rs. 97; MCap: Rs. 11,490 crore)

IHCL's performance for Q2FY21 broadly remained in-line with our estimates. Hotel re-opening in key metro cities like Delhi, Maharashtra along with new revenue initiatives led to QoQ improvement in topline. This along with significant fixed cost reduction helped the company to narrow down the losses for the quarter.

Q2FY21 Earnings Summary

- Revenues grew 78.7% QoQ to Rs. 256.7 crore (vs. I-direct est: Rs. 241.8 crore) while it was down 74.5% on YoY basis. Average occupancy levels of domestic business improved to 32.3% vs 20.5% in Q1 and 62% LY while ARR also improved by 12% QoQ to Rs. 5424 for the quarter. Major pick-up being witnessed in leisure destinations. New business initiatives like launch of Qmin (online food delivery), staycations in Q1FY21 yielded additional revenue of Rs. 135 crore in H1FY21. Ginger hotels performance also improved significantly with occupancy reaching to 51% in Sep-21 from average of 31% in Q1

- The company continued with its cost optimization measures and reduced total operating expenditure by 51.9% YoY to Rs. 407 crore. The company secured significant lease rental waivers that led to cost saving of Rs. 92 crore for the quarter. Overall, the company reduced fixed costs reduced by Rs. 134 crore, while variable expenses declined by Rs. 306 crore (in line with reduction in the revenues)

- As a result consolidated EBITDA loss narrowed down to Rs. 150.3 crore (vs I-direct est: EBITDA loss of Rs. 125 crore). On standalone basis, company reported EBITDA loss of Rs. 88 crore. While July-Aug month saw average EBITDA loss of Rs. 50.5 crore per month, September month notably registered positive standalone EBITDA of Rs. 13 crore with the improved hotel business

- Consolidated net loss came in at Rs. 230 crore (vs net profit of Rs. 71.3 crore last year) after adjusting for exceptional gain of Rs. 20 crore (forex related). Fiscal incentives provided by US and UK government also helped to reduce the losses of international business

- The company raised Rs. 750 crore of long term debt during H1FY21 to maintain the liquidity. The gross debt now stands at Rs. 3462 crore with net D/E ratio of 0.68x. The average cost of debt is at 6.7% (down 30bps from Mar-20)

The travel and tourism industry has been the worst affected sector so far due to lock-down. Now with unlocking of economy, the hotel business is gradually picking up with revival of demand being first getting witnessed in the domestic leisure segment along with rising preference towards trusted brand. The companies are also taking measures to drive more efficiencies through cost optimization that is being getting witnessed with Sep month clocking positive EBITDA for the company. With more focus on asset light business going forward, we expect liquidity profile of the company to improve going forward once business gets back to normalcy. We would be coming up with a detailed report soon.

Shares of INDIAN HOTELS CO.LTD. was last trading in BSE at Rs.96.5 as compared to the previous close of Rs. 96.3. The total number of shares traded during the day was 93648 in over 1638 trades.

The stock hit an intraday high of Rs. 97.5 and intraday low of 95.25. The net turnover during the day was Rs. 9023074.

Source : Equity Bulls

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