This story first appeared in DNA Money edition on Wednesday May 25, 2011.
The Indian Hotels Co Ltd (IHCL), the Tata group hospitality company, finally seems to have come in terms with the fact that its US operations are eating up profits generated in the home country.
Anil P Goel, executive director - finance, IHCL, said while there has been a growth in the company’s topline, the management is concerned about some pockets in the overseas operations. “We are very much concerned about our US operations. The business there is still under pressure and is actually denting the overall profitability at the consolidated level,” said Goel without sharing details on the extent of impact on profitability.
IHCL has three hotels in the US — Taj Campton Place in San Francisco, Taj Boston and The Pierre in New York. While the San Francisco and Boston properties are owned by the company, the New York hotel is on a long lease.
Goel said the management is doing everything that needs to be done to turn around the US operations. “It will have to be done in a timebound manner. The idea is to make sure that the high-quality assets being acquired over the last few years start contributing towards the overall profitability,” he said.
In another development, IHCL has decided to increase its stake in one of the associate companies — Piem Hotels Ltd — which owns the Vivanta by Taj President in Mumbai among other properties in the country. The management will invest Rs51 crore to increase its stake to over 50% from the current 42.6% in Piem.The additional stake in Piem will be acquired by IHCL directly or through an investment arm. Post acquisition, Piem will become an IHCL subsidiary.
During the current fiscal, IHCL will add close to 2,143 guestrooms to its portfolio of 12,795 rooms across 107 hotels globally. The additions will be spread across 16 new hotels to be opened between IHCL and its subsidiaries.
For the fiscal 2011, the company expects to make capital expenditure of around `300 crore, of which Rs150 crore has been already committed. IHCL has also retired debt of Rs600 crore in March 2011 and currently has Rs1,700 crore in debt on a standalone basis and Rs3,600 crore on a consolidated basis. Its current debt-to-equity ratio is 0.7:1.
On a standalone basis, for the fourth quarter of the fiscal 2011, the hotel company reported 57% increase in net profit at `93.93 crore from Rs59.91 crore in the same quarter of the previous fiscal. However, on a full-year basis, the company reported a decline in net profit from Rs153.10 crore last year to Rs141.25 crore in fiscal 2011.
The Indian Hotels Co Ltd (IHCL), the Tata group hospitality company, finally seems to have come in terms with the fact that its US operations are eating up profits generated in the home country.
Anil P Goel, executive director - finance, IHCL, said while there has been a growth in the company’s topline, the management is concerned about some pockets in the overseas operations. “We are very much concerned about our US operations. The business there is still under pressure and is actually denting the overall profitability at the consolidated level,” said Goel without sharing details on the extent of impact on profitability.
IHCL has three hotels in the US — Taj Campton Place in San Francisco, Taj Boston and The Pierre in New York. While the San Francisco and Boston properties are owned by the company, the New York hotel is on a long lease.
Goel said the management is doing everything that needs to be done to turn around the US operations. “It will have to be done in a timebound manner. The idea is to make sure that the high-quality assets being acquired over the last few years start contributing towards the overall profitability,” he said.
In another development, IHCL has decided to increase its stake in one of the associate companies — Piem Hotels Ltd — which owns the Vivanta by Taj President in Mumbai among other properties in the country. The management will invest Rs51 crore to increase its stake to over 50% from the current 42.6% in Piem.The additional stake in Piem will be acquired by IHCL directly or through an investment arm. Post acquisition, Piem will become an IHCL subsidiary.
During the current fiscal, IHCL will add close to 2,143 guestrooms to its portfolio of 12,795 rooms across 107 hotels globally. The additions will be spread across 16 new hotels to be opened between IHCL and its subsidiaries.
For the fiscal 2011, the company expects to make capital expenditure of around `300 crore, of which Rs150 crore has been already committed. IHCL has also retired debt of Rs600 crore in March 2011 and currently has Rs1,700 crore in debt on a standalone basis and Rs3,600 crore on a consolidated basis. Its current debt-to-equity ratio is 0.7:1.
On a standalone basis, for the fourth quarter of the fiscal 2011, the hotel company reported 57% increase in net profit at `93.93 crore from Rs59.91 crore in the same quarter of the previous fiscal. However, on a full-year basis, the company reported a decline in net profit from Rs153.10 crore last year to Rs141.25 crore in fiscal 2011.
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