The hotels sector has got a shot in the arm in the Budget, as the investment-linked tax deduction for setting up new hotels of two-star and above has been extended to all locations in India. Previously, the benefits were available only for star-rated hotels in the NCR region. This is expected to help in improving earnings, reduce the tax burden and help companies reinvest in the sector. Here, Indian Hotels is expected to be a beneficiary, as it has large investment plans across the country. The company is looking at increasing its Gateway Hotels count to 50 by adding 30 new ?The Gateway Hotels? at different locations in the country by 2015. Of these 30, about 13 are likely to be opened by 2012 and would be set up in places including smaller towns and other locations where tourist traffic is higher.
Net sales grew by 42.5% on a sequential basis in the quarter ended December 2009 to Rs 437.9 crore, thanks to a visible pick-up in occupancy across cities in the domestic market during the third quarter. The Mumbai terror attack is still taking its toll as net sales declined by 4.1% over the same period of the previous year because of closure of 287 rooms of the Taj Mahal Palace & Tower. The property is still undergoing renovation and is expected to re-open in May 2010. However, better cost control saw the operating profit margins rise by 1,790 basis points sequentially to 34.5%. Increased tourist arrivals and an uptick in the economy have boosted occupancy levels as they increased by 1,000 basis points over the September 2009 quarter to 70% against an improvement of 500 basis points growth to 69% in the last year. Arrival of foreign tourist for December 2009 grew by over 21% compared with December 2008, it recorded a 7% growth in the December quarter over the corresponding period of the previous fiscal. Delhi, Mumbai and Hyderabad recorded the highest growth in occupancy levels during this quarter. Overall, income from food and beverage rose 44% over the September 2009 quarter to touch Rs 111.8 crore.
For the company, the interest burden has remained a cause of concern. It increased by 105% to Rs 44.2 crore in the December 2009 quarter over the previous year. During the quarter, the company raised Rs 400 crore at an average rate of 9.5% to fund its ongoing three greenfield projects. Moreover, the company would be raise around Rs 500 crore and Rs 700 crore through non-convertible debentures, of five years and 10 years tenures, to refinance a portion of its existing debt. This is expected to reduce its debt burden.