The Indian Hotels RI review (Apply)

The Indian Hotels Company Limited Logo

•    IHCL is one of the leading hospitality chains having international operations.
•    It is known by its flagship brand TAJ, a most preferred hotel brand by tourists.
•    The company suffered a severe setback for FY21 due to the pandemic.
•    As the global economy has started gaining momentum, the hospitality segment is attracting investors across the board. 

The Indian Hotels Co. Ltd. (IHCL) is one of the leading hospitality chains in India by the number of hotels (Source: Horwath HTL Report) focussed on being a dynamic hospitality ecosystem. It is primarily engaged in the business of owning, operating and managing hotels and resorts primarily under various brands including, the flagship brand "Taj". The Company was incorporated in 1902 and is promoted by Tata Sons Private Limited, which held 38.09% of the Company's shareholding as of September 30, 2021.

IHCL's first hotel, the Taj Mahal Palace, Mumbai, commenced operations in 1903. In the past few decades, it has expanded geographically to register a presence in key travel destinations both in India and internationally. The company has also converted or restored former royal palaces in India into flagship hotels. Some of its marquee hotels which are operated out of former royal palaces include Rambagh Palace, Jaipur, Umaid Bhawan Palace, Jodhpur, Taj Falaknuma Palace, Hyderabad and Taj Lake Palace, Udaipur. 

In addition to the palace hotels, many hotels are located in iconic or heritage buildings, such as the Taj Mahal Palace, Mumbai, The Pierre, New York or the Taj Cape Town, South Africa. In 2004, it launched hotels under the brand, "Ginger", formerly, "Indione", to cater to the budget segment. It has, over time, systematically invested in creating assets directly or through subsidiaries, joint ventures or associates in both India and international locations. As of September 30, 2021, it operated or managed 170 hotels and resorts globally with approximately 19,774 rooms with a presence across various geographical segments, including beach resorts, hill stations, wildlife sanctuaries, major cities and tourist destinations. Of this, it has 17 international hotels with 2,654 rooms in 13 international locations.

The company is coming out with a rights issue (RI) of 132139827 equity shares of Re. 1 each at a fixed price of Rs. 150 per share to mobilize Rs. 1982.10 cr. The company is offering rights shares in the ratio of 1 share for every 9 shares held as of the record date of November 13, 2021. The issue opens for subscription on November 24, 2021, and will close on December 08, 2021. Post allotment, shares will be listed on BSE and NSE. The company will be spending Rs. 11.36 cr. for this RI process. From the residual portion, it will utilize Rs. 1200 cr. for repayment/prepayment of certain borrowings, Rs. 454.11 cr. for buying 37.07% stake in RCL, Rs. 175 cr. for part payment of 14.28%stke in ELEL, Rs. 75 cr. for investment in step-down subsidiary (United Overseas Holdings) and Rs. 66.63 cr. for general corporate purposes.  

The issue is jointly lead managed by Kotak Mahindra Capital Co, Ltd. and HSBC Securities and Capital Markets (India) Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post RI, the company's current paid-up equity capital of Rs. 118.93 cr. will stand enhanced to Rs. 132.14 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 19820.97 cr. 

On the financial performance front, for the last two fiscals, on a consolidated basis, IHCL has posted turnover/net profit (loss) of Rs. 4595.56 cr. / Rs. 350.77 cr. (FY20) and Rs. 1739.88 cr. / Rs. - (694.21) cr. (FY21). It suffered a severe setback for FY21 on account of the pandemic. But now it is back on track with rising turnover and reducing losses. As per reviewed statement of account, on a consolidated basis, it has posted a loss of Rs. - (388.40) cr. on a turnover of Rs. 1122.58 cr. 

As of September 30, 2021, the promoter's holding was 40.75%. As of the same date, it's current paid-up equity capital of Rs. 118.93 cr. is supported by free reserves of Rs. 3131.63 cr. 

SCRIP PERFORMANCE: Based on BSE Website (Scrip Code: 500850):
The scrip last closed on cum-right basis at Rs. 215.95 on November 10, 2021, and opened at Rs. 212.90 on an ex-rights basis on November 11, 2021. Since then it has marked high/low of Rs. 224.25 / Rs. 207.10. It last closed at Rs. 210.50 on November 18, 2021. Based on this closing price, its market cap stands at Rs. 27815.43 cr. The scrip has posted the last 52 weeks' high/low of Rs. 230.14 / Rs. 90.89.

Conclusion / Investment Strategy

The company has the flagship brand TAJ and is owned by the Tata group. RI pricing is at a discount to its current price movements. The industry is slowly gaining back momentum and is expected to be in full force in the near term. Investors may invest in this most popular hospitality sector brand for long term rewards.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Nov 19, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.


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