EIH's good show during all the three quarters so far, has to be seen against the lower base. During 1997-00, room night demand (RND) and average daily rate (ADR) declined by 24.9 per cent and 36.2 per cent in the five star category. Further, the occupancy rates in Delhi and Mumbai, that account for the highest number of arrivals, witnessed a decline of 4.7 per cent and 4.9 per cent respectively y-o-y during 1999-2000 with an adverse fallout on the fortunes of hospitality industry. However, things have looked up since.

The tourism department estimates the growth of tourist arrivals at 2.5 per cent in the year 2000-01, a tad better than 1.6 per cent during 1996-99 period.

Historically, December, every year witnesses the highest inflow of tourist arrivals. This factor seems to have aided the topline growth of 18 per cent to Rs 130.9 crore up from Rs 110.9 crore. Tourist arrivals peak in October- March in India. This augurs well for the company in the coming quarter as well. A tight leash over expenses which remained almost flat at Rs 96.4 crore against Rs 95.5 crore has been instrumental in a whopping 125 per cent jump in the operating profits. Operating margins doubled to 23.4 from 13.8 as a result.

Interest costs witnessed a jump of 67 per cent as a result of huge capex planned by the company. Depreciation and tax provisioning rose by 13 per and 11.7 per cent respectively. Notwithstanding these, net profits jumped by 80 per cent to Rs 27.8 crore (Rs 15.43 crore). Net margins, too, spurted to 20 per cent from 12.5 per cent.

Lately the hospitality business has seen an over supply situation what with an estimated 2,200 rooms coming up over the next three years in Mumbai alone. This over-supply would eventually lead to pressure on occupancy rates and ADRs resulting in lower margins for the players in the industry.

Hindalco Industries
Hindalco's performance for the quarter ended December 2000, is slightly below expectation. Higher aluminium prices, up 10 per cent on a q-o-q basis, coupled with higher export realisation from rupee devaluation raised the expectation of a 15 per cent growth in net profit. However, heavy taxes pared down the increase in the bottomline to 11 per cent.Revenue from operations recorded 11.7 per cent increase to Rs 561.1 crore.

Share of value added products such as extrusions and rolled products was 54 per cent of the total output. Metal production crawled up by 1.6 per cent to 63,768 mt. Raw material consumption and manufacturing expenses were 11.1 per cent more at Rs 234.6 crore. Operating profit has shown a decent gain of 13.2 per cent to Rs 258.2 crore.

Interest burden has remained largely unchanged at Rs 16.3 crore. This is remarkable considering the ongoing capacity expansion. The company has raised a debt of Rs 150 crore in the form of NCD during the current quarter.

This will add to the financial outgo. The same is the case with depreciation. But even if these two items move up, it is better for the company as it badly needs some tax cover. Nearly 32 per cent of the PBT of Rs 245.5 crore has gone into paying taxes.

Presently, India has one of the lowest per capita aluminium consumption of around 0.6 kg. However, slowly the usage is growing. Earlier, the major customer was electrical sector. The customer base is widening with rise in demand from packaging, white goods segment, household utensils. The Renukoot expansion is expected to be complete by fiscal 2003-2004.

Alongwith the capacity, the power generation will also be augmented by 150 mw to 769 mw. This will keep the cost of production in check as power is one of the major elements in manufacturing cost. Currently, the cost per unit of power for the company is Re 0.90, against Rs 1.60-Rs 4 for other producers.

Considering the power consumption of around 13,000 kwh per tonne of aluminium, savings will be huge. The output of the brownfield project will the company to cater to the growing needs of the Indian consumer and ensure increased availability for exports.

Sachchidanand Shukla & Manish Joshi