Done Deals: Profit Down by 96% but Indian Hotels Co.’s Buying Spree Rolls On

Wednesday, June 17, 2009

Profit Down by 96% but Indian Hotels Co.’s Buying Spree Rolls On

MUMBAI, India—Indian Hotels Co. Ltd. (IDHCF-Bombay Stock Exchange) disclosed its consolidated profit after tax of Rs 124.6 million (US $2.6 million) was down by 96.48 percent in fiscal 2009 that ended March 31.

In fiscal 2008, the company reported a consolidated profit after tax of Rs 354.98 crore (US $74.8 million).
Consolidated total income decreased to Rs 27.82 billion in fiscal 2009 from Rs 30.59 billion in the previous year.

For the fiscal 2008-09, stand-alone profit after tax of the company dropped to Rs 2.34 billion from Rs 3.77 billion in the previous year.

Regardless of the bottom-line numbers, Indian Ho tels Co., which runs the Taj Group of hotels, has acquired control of Hotel Sea Rock (top left photo) in north Mumbai for 6.8 billion rupees ($143 million), the company announced today.

In a prepared statement, the nation’s biggest operator of hotels says it will spend 5 billion rupees in the next two years to tear down a dormant building, unused since the 1993 serial bomb blasts in Mumbai, and convert it into a luxury hotel, says company vice chairman R.K. Krishna Kumar. (bottom left photo)

Mumbai-based Indian Hotels will meet the acquisition cost from the 14 billion rupees raised by selling stocks to shareholders last year, says chief financial officer Anil Goel.

The company plans to integrate the site with its existing property known as Taj Lands End. (top right photo)

The acquisition gives Indian Hotels room to expand in the northern suburb of Bandra, soon to be linked to the downtown area through a bridge over the Arabian Sea.

“Within days of the Bandra-Worli Sea Link being set to open, we are delighted to announce that we are able to propose a world-class convention and hospitality center,” Kumar says.

There are no pending lawsuits relating to the Sea Rock property, Kumar says. The hotel used to be a popular gathering location for film stars before it was closed following the bomb blasts in 1993.

“It will be the most luxurious Mumbai has seen,” Kumar says. “It will be a landmark in that part of town, as the Taj is in south Mumbai, or as the Opera House is to Sydney.”

Indian Hotels plans to spend another 3 billion rupees on other hotel projects during the year, he says. The company is “keen to increase its stake in Orient-Express Hotels Ltd. (middle left photo) and work with the group,” Kumar says.

Mumbai-based Indian Hotels owns 9.7 percent of Orient- Express and will “be happy” to raise its stake, he said. The two groups have had meetings “at the highest level,” he says.

“We hope to continue the dialogue that will give us the right kind of chemistry to work together,” Kumar says.

“I don’t think we should be talking about stakes alone. The problem in the beginning was the perception that we were moving in to make a hostile move on acquiring stakes and destroying the autonomy or independence of the company.”

The Tata Group, which runs Indian Hotels, doesn’t make “hostile moves,” Kumar says. Indian Hotels, which runs 97 hotels across the globe, gets about a third of its revenue from international operations.

The company expects to fully re-open the terrorist-hit, 106-year-old Taj Mahal Palace & Tower (middle right photo) in Mumbai by the end of the year or in January, 2010, says Kumar.

The hotel was damaged in the Nov. 26-29, 2008 attacks, along with another luxury hotel, the main railway terminal and sites elsewhere.

The attacks damaged a large part of the heritage wing and destroyed paintings, chandeliers, silk carpets and wooden furniture at the hotel located next to the landmark
The hotel re-opened its tower wing in December 2008.

“We are trying to restore it with love and devotion and don’t want to rush,” Kumar says. “We want to see it as the most beautiful hotel in the world.”

The Mumbai Taj contributes about a fifth of Indian Hotels’ revenue. The hotel is “more than adequately covered” by insurance, CFO Goel says. The hotel has 62 percent occupancy, compared with 75 percent a year earlier.

India’s economy, which grew 5.8 percent in the three months to March 31, may expand 7 percent in the fiscal that began April 1, the government has predicted.