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Friday, 31 May 2013

Orient-Express provision costs IHCL dear

An edited version of this story first appeared in DNA Money edition on Friday, May 31, 2013.

Tata group’s hospitality business, Indian Hotels Co Ltd (IHCL) reported a standalone loss of Rs 338.90 crore in the fourth quarter of fiscal 2013 (Q4FY13) against a profit of Rs 65.21 crore in the Jan-March quarter of FY12. The loss, company officials said, was largely on account of exceptional expenditure to the tune of Rs 424 crore on account of provisioning for some impairment in the value of investments in Orient-Express Hotels (OEH) and BJets Pte Ltd (a private air charter company).

According to Anil P Goel, executive director - finance, IHCL, impairments to the tune of Rs 373 crore in Orient-Express Hotels (Rs 305 cr) and BJets Pte Ltd (Rs 68 cr) have been recognised in the books. “We have an offshore subsidiary company called Taj Hong Kong through which we have a variety of important off-shore investments. What we have done is looked at value of IHCL’s investment in the subsidiary company and re-looked at the valuation of the underlying portfolio, compared the upside and downside and based on the calculations we have recognised the said investments in OEH and BJets,” said Goel.

In addition, the company has created a provision of Rs 27.55 crore, to satisfy the obligations of BJets Pte Ltd, an associate company, currently under restructuring. Another Rs 23 crore has been incurred towards the settlement of a dispute that was under arbitration for over 25 years.

As for company board’s final decision on OEH investment that was to be taken in March 13, Goel said that the board has not yet taken a call on the same.

The standalone turnover of the company for the year ended FY13 was Rs 1875.86 crore as against Rs 1808.73 crore in the previous year. Profit after financing cost but before exceptional item was Rs 223 crore as compared to Rs 236 crore.

IHCL said that isolating the impact of the extraordinary provision of Rs 424 crore, the profit after tax for the standalone company would stand at Rs 147 crore. However, on a consolidated basis, it would be a loss of Rs 7 crore as against profit of Rs 3 crore for the preceding year.

For the fourth quarter FY13, IHCL reported an almost flat turnover of Rs 556 crore as compare to Rs 560.15 crore in the corresponding quarter of the previous fiscal.

Company’s debt on books on a standalone basis stood at Rs 2,500 crore while on consolidated basis it is Rs 3,800 crore. The company received Rs 370 crore in the form of cash from promoters of which Rs 270 crore has been used to retire debt.

IHCL opened six hotels with 677 guestrooms in FY13 and the total tally currently stands at 119 hotels with 14,423 guestrooms as on March 31, 2013. The company will launch 21 hotels in the next two years with a total of 2,688 guestrooms across the country.

The capital expenditure in the next 18 months will be to the tune of Rs 200 crore for two greenfield Vivanta by Taj projects in Dwarka and Guwahati. This will be funded through internal accruals.

IHCL is also restructuring the shareholding of its 20-odd international assets housed in different subsidiaries. Goel said that IHCL wants to through an elegant structure shift all of it into one international entity.

"It will be one apex offshore company owned by IHCL, As a result of this exercise, the profile of those 20-odd assets becomes visible through one entity and effectively what it becomes is that the some of the parts become more valuable. We are moving in that direction to have that flexibility and in a perfect world I’d like to do it in the current fiscal," Goel said.

Also, IHCL managing director Raymond N Bickson's tenure with the company gets over in July 2013. when asked, Bickson said he will be applying for an extension.

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