The stock of one of the oldest Indian hotel chain company fell as much as 10% on Tuesday which made a slump in market capitalisation.
Shares of the Indian Hotels Company Ltd today lost about 10% on Tuesday after the Tata Group chairman N Chandrasekaran yesterday said Indian Hotels took “appropriate financial decisions” by selling certain assets post financial crisis. The investors’ mood also oozed after the board of directors of Indian Hotels Company Limited (IHCL) approved a rights issue of equity shares to the existing shareholders of the company.
The stock of Indian Hotels Company fell as much as 9.78% to the day’s low of Rs 108.35 and at this price the Taj group company has lost 1,161.4 crores in the market capitalisation. Today the market cap of IHCL fell to Rs 10,718.78 crores from Rs 11,881.18 crores as on Monday’s close of Rs 120.1. While at the current market price of Rs 111.2 the market cap erosion stood at Rs 880.45 crores.
One of the India’s oldest hotel chain firm is issuing equity shares by way of a rights issue to raise an amount not exceeding to Rs 1,500 crores in order to meet long-term financing needs for capital expenditure, growth plans and debt repayment, company said in an exchange filing.
Earlier yesterday, at IHCL’s 116 annual general meeting, N Chandrasekaran told shareholders that during the second half of the last fiscal year, certain issues relating to past decisions of the company with regard to acquisition and sale of foreign properties, including Orient Express, Taj Boston and the Pierre, were raised.
However, the predecessor Cyrus Mistry alleged that Indian Hotels Company Ltd (IHCL) faced a “near-death experience” due to some acquisitions and had to take write-downs near equal to its entire net worth. Mistry also refuted Chandrasekaran comments in IHCL’s annual report that the acquisitions made by the company were “with the aim of promoting the ‘Taj’ brand and to expand the business and operations of the company”.
“Prior to the financial crisis, the company had an established international expansion strategy and many decisions were taken by the board to establish marquee properties in key geographies,” he added.
“Post the financial crisis, and the resulting adverse impact on the hospitality sector, the board took appropriate financial decisions and decided to exit some of these ventures while retaining iconic properties like the Pierre,” he added. He said that the board was deeply involved in all the deliberations regarding all acquisition and sale of various holdings and assets over time and had approved each of these initiatives.
Chandrasekaran assured shareholders that the board of directors have always acted in the best interest of the company and will continue to do so in the future. “I would like to further add that in the lifetime of an institution as revered as IHCL, many decisions are made. All the decisions are made with the best of intentions and very much remain subject to global and local events and economic undercurrents,” the IHCL chairman added.