With the economy picking up and the tourist season looking better, hotel sector stocks have started gaining attention. Hotel Leela Venture is also being looked at closely by analysts, especially after it reported operating profit margins of 40% in the quarter ended December 31, 2009. With 18% sequential improvement, the company was back to the 40% levels it had maintained for the past three years. It was in March 2009 that the operating profit margins had taken a beating and were at 12% levels. Revenues for the December 2009 quarter stood at Rs 127.7 crore, up 5%, over the same period of the previous year and 40%, on a sequential basis. The net profit was registered at Rs 28.9 crore, up by 40%, over the same period of the previous year. Analysts reckon that this is due to better absorption of costs on the back of an increase in RevPAR or revenue per available room, an important metric for the hotel industry. The RevPAR in the Mumbai property jumped 50% sequentially on an improvement in occupancy rates from 55% in the September 2009 quarter to 78% in the December 2009 quarter. Other properties too, like the ones in Goa and Kovalam witnessed 121% and 107% increases in RevPARs, thanks to an improvement in average room rents and occupancy rates. And, Bangalore, its prime property saw muted growth of 9%, on a sequential basis. Moreover, the company would be expanding operations and increasing around 730 rooms in the next two years and this would reduce its dependence on Bangalore which contributes to around 40% of its revenues. The company would also be looking at reducing its debt burden it has bought back 59% of its FCCB bonds and 24% of its Euro bonds at a discount to the accreted price, mention analysts. And the management would be raising $130 million through a combination of FCCB issuance and QIP to finance expansion plans and reduce debt.
