SUBMITTED BY:-

ALOK BANSAL
SCMLD
09860848003
Hotel Leela Venture is a well-known hotel chain in India catering primarily to the
premium segment. The company operates four hotels (estimated 1500 rooms) under
the 'The Leela' brand across India. The company has a marketing alliance with
Kempinski for properties in India. Its luxury properties cater to both business and
leisure travellers. With rapid growth in room demand, the company plans to expand
its presence in the growth cities of Hyderabad, Chennai, Pune and New Delhi
through management contracts. It is the flagship company of Leela Group, which
holds a 51% stake in Hotel Leela Venture.

EXPECTED CASH EPS NEXT YEAR WOULD BE AROUND 3.082, WHICH IS LESS THEN
CURRENT YEAR, SO AS PER ME ITS NOT THE GOOD INVESTMENT VENUE.

As on 20th november 2009 REVENUE DISTRIBUTION

45%
Market price 39.15 Rs 40%
35%
Volume traded 206631 Shares 30%
52 week high/low 43.15-16 Rs 25%
20%
Market cap in rs 1479.09 Crores 15%
PE ratio 10.2 Times 10%
5%
EPS 3.84 0%
Face Value 2 Rs Bangalo Mumba Goa Kovala
re i m
Last dividend (%) 20 2008-09 40% 33% 14% 12%
2007-08 43% 35% 12% 10%

This graph depicts the average revenue generated by

different locations in 2007-08 and 2008-09.

CURRENT OPERATIONS ROOMS PRESENCE OF HOTEL LEELA IN INDIA TILL 2009

Mumbai 390
Goa 185
Bangalore 352
Kovalam 182 Bangalore
Udaipur 80
Gurgaon 322
TOTAL

UPCOMING PROJECTS in 2010 Mumbai

Hotel Goa
The Leela IT Park, Chennai: 13 foors leela
The Leela Palace, Chennai 380
The Leela Palace, New Delhi 250

UPCOMING PROJECTS in 2012-2013, for which

they have acquired 8 lands across country Udaipur

This table shows No of rooms per hotel and upcoming

projects. EXPANSION OF BUSINESS IN 2010

GURGAON
DELHI CHENNAI
 This table shows average revenue generated by
different hotels and ARR(average revenue per
Per Room Revenue in rs. In 2008-09 room).
Rev / room Arr
This will depend on many factors like no. Of days
Mumbai 37,30,513 10,221 hotel being in process and the occupancy rate.
Goa 33,41,622 9,155
As all four Hotels were running throughout the year
Bangalore 50,20,455 13,755
so we can take on basis of 365 days, only the
Kovalam 29,48,901 8,079 occupancy rate will vary.

REVENUE MODEL FOR LEELA HOTEL

2009-10 Total in rs
new
City goa banglore mumbai kolampur udaipur gurgaon chennai delhi
%holding 51% 51% 51% 51% 51% 51% 51% 51%
Available
room 185 352 390 182 80 322 380 250
No of days 365 365 365 365 210 210 180 180
Occupancy
ARR 9795.99 14717.50 10936.02 8644.72 6500 7500 6000 8500
Total 66147400 189090400 155674300 57426900 10920000 50715000 41040000 38250000 609264000
revenue 0 0 0 0 0 0 0 0 0
24084640 103563952 24084640 23328900 18878400 17595000
Fixed cost 0 0 842962400 0 50232000 0 0 0
Variable 11201712 10143000
cost 0 401394680 326716600 93347600 21840000 0 82080000 76500000
Lease
rental 26400000 94600000 77000000 22000000 4368000 20286000 16416000 15300000
28221048 21807500 15214500 12312000 11475000 159239428
EBITDA 0 359269800 310064000 0 32760000 0 0 0 0
EBITDA
MARGIN 42.66% 19.00% 19.92% 37.97% 30.00% 30.00% 30.00% 30.00%
4.63% 5.90% 5.09% 3.58% 0.54% 2.50% 2.02% 1.88%
INTEREST 15146608 19282483 16641543 11704372 1758272 8165822 6608012 6158783
Depreciatio
n 31302989 39850464 34392521 24189035 3633763 16876033 13656559 12728152 176629516
23576088 18218159 12710314 10285542 133029886
Pbt 4 300136853 259029936 3 27367965 5 9 95863064 9
Tax 33827424 43064211 37166112 26139764 3926808 18237003 14757894 13754616
20193346 15604182 10886614 113942503
PAT 0 257072642 221863824 8 23441157 2 88097535 82108448 7
No of
Shares 377824992
dividends 151500000
116455455
cash profit 3
cash eps 3.082
 Green area shows the projection part, as we have taken the average rental of room as
per different location.

Then according to their date of commencement we have taken total revenue taking
more occupancy rate because of COMMONWEALTH GAMES in Delhi NCR.

Also we have bifurcated expenses as per fixed and variable, and on other side revenue
into Rental, food & beverages.

We have supposed that industry would grow @ CAGR of 9 %, taking other factor such
as terrorism, COMMONWEALTH etc.

Finally we found expected cash EPS.

Risks

Rating to Leela would be High risk investment because of:

1) Any delays in room supply in Bangalore;

2) Early launch of the company's new hotels coming up in Chennai, Hyderabad and Pune; and
3) Lack of occupancy rate;
4) Subsidised rates due to government intervention in commonwealth games.

Steps to reduce leverage; but gearing still high

Leela’s has bought back €12m and $33m worth of FCCB bonds at 25-35% discount, and has
also revalued its land assets by Rs10.3bn – this has reduced debt/equity to 1.2x (vs. ~2.0x
earlier). That said, debt levels of Rs24.4bn are still high, with FCCBs of €39m payable in
Sept’10, if unconverted (converted @ Rs47/share).

Analysis of Current assets and liabilities

7.00
6.00 Current Ratio
5.00
Quick Ratio
4.00
3.00
Inventory
2.00 Turnover
1.00
-
2005 2006 2007 2008 2009
As company has paid cash during 2008 for buyback of FCCB’s so its current and quick ratios
are falling whereas inventory turnover depends on occupancy rate.
THIS IS A RATIO ANALYSIS OF HOTEL WHICH COVERS ALL RATIOS LIKE LIQUIDITY,
PROFITABILTY, OPERATING AND DUPOINT ANALYSIS etc.

RATIO ANALYSIS
year 2005 2006 2007 2008 2009
Current Ratio 4.20 6.04 1.75 2.45 0.92
Quick Ratio 3.75 5.53 1.41 2.24 0.92
Inventory Turnover - 1.83 1.79 2.14 1.82
Average Collection Period 34.40 40.77 36.51 22.04 -
Fixed Asset Turnover 21.70% 23.35% 25.09% 22.69% 13.17%
Total Asset Turnover 16.83% 16.49% 19.35% 16.22% 9.60%
Debt Ratio 3.91% 3.15% 5.77% 6.41% 6.79%
Debt-to-Equity 4.73 9.75 12.87 26.94 32.41

Times Interest Earned 1.66 3.78 3.65 5.03 3.34

Gross Profit Margin 83.73% 85.69% 86.39% 85.38% 83.74%
Operating Profit Margin 33.37% 38.30% 38.99% 36.08% 20.06%
Net Profit Margin 11.47% 16.43% 11.69% 14.69% 3.52%

Return on Total Assets (ROA) 1.93% 2.71% 2.26% 2.38% 0.34%

Return on Equity (ROE) 3.83% 6.52% 4.94% 8.13% 0.82%

Earnings Per Share 1.73 4.61 6.01 10.00 2.11
Price/Earnings Ratio 92.55 75.27 9.29 4.08 9.48
DUPONT ANALYSIS 2005 2006 2007 2008 2009
Net Profit AT/Sales 11.47% 16.43% 11.69% 14.69% 3.52%
Sales/Total Assets 16.83% 16.49% 19.35% 16.22% 9.60%
ROA 1.93% 2.71% 2.26% 2.38% 0.34%
Net Profit AT/Total Assets 1.93% 2.71% 2.26% 2.38% 0.34%
Total Assets/Stockholders. Equity 1.99 2.41 2.18 3.41 2.43
ROE 3.83% 6.52% 4.94% 8.13% 0.82%
STATEMENT OF CASH FLOWS
CASH FLOW FROM OPERATING ACTIVITIES 2,005.00 2,006.00 2,007.00 2,008.00 2,009.00

Net Profit After Taxes 29.44 53.73 44.53 75.59 15.94

Depreciation 29.83 32.45 33.75 45.34 54.92
Decrease in Accts. Receive. -12.50 -1.60 7.12 31.51
Decrease in Inventories -4.94 -7.17 -3.29 41.96
Decrease in Other Assets 5.28 -22.07 -75.87 292.34
Increase in Accounts Pay. 12.31 -2.16 42.86 -70.37
Increase in Accruals - - - -
Increase in Taxes Payable 33.91 24.90 9.91 -25.60
Increase in Other Cur. Lia. -8.33 98.59 38.39 -150.77
Cash Flow from Oper. Act. 59.27 111.91 168.77 140.05 189.93

CASH FLOW FROM INVESTMENT ACTIVITIES 250.44

Increase in Gross Fixed Assets -250.90 -152.47 -807.29 -1,229.13

Cash Flow from Investments - -250.90 -152.47 -807.29 -1,229.13
283.26
CASH FLOW FROM FINANCING ACTIVITIES 156.86

Increase in Notes Payable - - - -

Increase in Long-Term Debt - - - -
Changes in Stockholders' Equity 845.23 363.30 -181.67 1,084.37 413.85
Preferred Dividends Paid -3.84 -1.94 - - -
Common Dividends Paid (-) -5.00
Cash Flow from Financing Activities 841.39 356.36 -181.67 1,084.37 413.85

Net Incr. in Cash / Mark. Securities 900.66 217.37 -165.37 417.13 -625.35
 This is Profit and loss of Leela hotels during past 10 years, with expected Profit and loss
for 2010.

Also it contains %age change and expenditures as %age of sales.

Hotel Leela Venture Ltd. Profit And Loss - Standalone - Actual - Schedules- [INR-Crore]
Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar- Mar-
Particulars Mar-10
99 00 01 02 03 04 05 06 07 08 09
No of Months 12 12 12 12 12 12 12 12 12 12 12 12
INCOME : E
Operating Income 121.68 122.03 122.51 86.39 134.42 195.41 256.69 326.95 380.86 514.58 452.24 609.00

Rooms/Restaurant/Banquets 86.51 82.97 82.03 54.24 76.30 118.69 163.31 214.57 256.15 347.62 299.12 338.01
% of rental of total income 71.10 67.99 66.96 62.79 56.76 60.74 63.62 65.63 67.26 67.55 66.14
Food & Beverages 23.75 28.67 29.66 24.51 39.76 55.73 71.82 83.32 95.70 130.11 117.55 132.83
% of f&b of total income 19.52 23.49 24.21 28.37 29.58 28.52 27.98 25.48 25.13 25.28 25.99
Other Operational Income 11.42 10.39 10.82 7.64 18.36 20.99 21.56 29.06 29.01 36.85 35.57 40.19
Less: Excise Duty 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Net Sales 121.68 122.03 122.51 86.39 134.42 195.41 256.69 326.95 380.86 514.58 452.24 609.00

EXPENDITURE :
Foods, Beverages Consumed 7.92 8.59 8.52 6.92 10.92 14.91 19.78 21.14 24.88 33.83 28.84 32.59
%age of sales 6.51 7.04 6.95 8.01 8.12 7.63 7.71 6.47 6.53 6.57 6.38
Power & Fuel Cost 8.59 11.13 11.34 10.48 18.29 21.75 21.98 25.65 26.97 41.40 44.69 50.50
%age of sales 7.06 9.12 9.26 12.13 13.61 11.13 8.56 7.85 7.08 8.05 9.88
Employee Cost 19.45 24.48 25.60 24.76 37.27 36.68 39.28 43.68 52.53 80.73 88.38 99.87
%age of sales 15.98 20.06 20.90 28.66 27.73 18.77 15.30 13.36 13.79 15.69 19.54
Other Operating & Servicing Cost 9.91 11.88 12.58 10.01 16.96 18.32 27.48 30.69 37.53 48.33 48.14 54.40
%age of sales 8.14 9.74 10.27 11.59 12.62 9.38 10.71 9.39 9.85 9.39 10.64
Selling and Administration
Expenses 22.76 18.60 18.92 13.64 21.86 25.95 31.95 45.29 55.29 76.66 84.44 95.42
%age of sales 18.70 15.24 15.44 15.79 16.26 13.28 12.45 13.85 14.52 14.90 18.67
Miscellaneous Expenses 2.75 2.78 2.89 2.39 2.86 2.34 0.74 2.89 1.40 2.61 12.11 13.68
%age of sales 2.26 2.28 2.36 2.77 2.13 1.20 0.29 0.88 0.37 0.51 2.68
71.38 77.46 79.85 68.20 108.16 119.95 141.20 169.33 198.60 283.55 306.59 346.45
%age of sales 58.66 63.48 65.18 78.94 80.46 61.38 55.01 51.79 52.15 55.10 67.79
Operating Profit (Excl OI) 50.30 44.57 42.66 18.19 26.26 75.46 115.48 157.63 182.26 231.03 145.65 262.54
%age of sales 41.34 36.52 34.82 21.06 19.54 38.62 44.99 48.21 47.85 44.90 32.21
Other Income 9.02 14.43 13.77 14.18 61.40 12.22 15.32 19.49 81.90 74.53 129.93 146.82
%age of sales 7.41 11.82 11.24 16.41 45.68 6.25 5.97 5.96 21.50 14.48 28.73
Operating Profit 59.32 59.01 56.43 32.37 87.66 87.68 130.80 177.12 264.16 305.55 275.58 409.36
%age of sales 48.75 48.36 46.06 37.47 65.21 44.87 50.96 54.17 69.36 59.38 60.94
Interest 31.29 30.30 20.35 15.58 56.70 53.33 51.75 33.12 40.71 36.91 27.20 30.74
%age of sales 25.71 24.83 16.61 18.03 42.18 27.29 20.16 10.13 10.69 7.17 6.01
PBDT 28.02 28.71 36.08 16.79 30.96 34.35 79.05 144.00 223.45 268.64 248.38 378.63
%age of sales 23.03 23.53 29.45 19.44 23.03 17.58 30.80 44.04 58.67 52.21 54.92
Depreciation 12.89 18.79 19.17 15.50 26.26 27.17 29.83 32.45 33.75 45.34 54.92 62.06
%age of sales 10.59 15.40 15.65 17.94 19.54 13.90 11.62 9.93 8.86 8.81 12.14
Profit Before Tax 15.14 9.92 16.91 1.30 4.70 7.18 49.22 111.54 189.70 223.30 193.45 316.57
%age of sales 12.44 8.13 13.80 1.50 3.50 3.67 19.17 34.12 49.81 43.39 42.78
Provision for Tax 1.65 1.17 1.48 0.17 -11.06 -0.42 4.46 38.37 63.27 73.18 47.58 66.99

Profit After Tax 13.49 8.75 15.43 1.13 15.77 7.60 44.76 73.17 126.43 150.12 145.87 249.58
%age of sales 11.09 7.17 12.59 1.31 11.73 3.89 17.44 22.38 33.20 29.17 32.25
Appropriations 40.96 35.24 27.02 13.81 31.86 93.04 143.08 206.74 265.31 312.55 346.43 391.47

Equity Dividend % 10.00 5.00 5.00 0.00 0.00 0.00 10.00 20.00 22.50 25.00 20.00 25.00
%age of sales 8.22 4.10 4.08 0.00 0.00 0.00 3.90 6.12 5.91 4.86 4.42
Earnings Per Share 2.65 1.09 1.87 0.00 2.47 1.26 5.78 9.66 3.41 3.97 3.86
Book Value 55.54 56.02 45.57 41.79 44.12 45.43 66.20 76.92 18.50 18.99 18.59 18.59
 PEBANDS
600

500
These are the PE BANDS, at different PE like
400 25, 30, 35, 40 and 50.
300
This also shows that if at same position
200 company would be having PE ranging from
100 25 to 50 then what would be the market
price for the same.
0
31-Mar-05 31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 Also we can analyze that if company has hit
high or low in terms of PE, we can take our
SELL, BUY or hold call.

6000
S&P v/s LEELA
This shows us movement of Leela hotels in
5000
comparison of S&P, and black trend line
4000
shows the exponential growth of Leela
3000 hotels.
2000
This is correlation for 1year, starting from
1000
24th November 2008 to 20th November
0
2009.

This has been taken from research

conducted by CRISIL on hotel industry
which shows the occupancy rate
This is the model which shows the ECONOMI VALUE ADDED (EVA) for Leela Hotels, taking some assumptions.

Assumptions Sales
COGS = Variable COGS 452.24
Contributio
Rate of tax = 33.33
n
WACOC is on
378.71
debt+equity
Variable
Cost of
EBIT
Goods
Sold
91 73.53
Operating
Overhead
Profit
90.72 400
(1-Rate of
Profit Margin Income
Tax)
4.0% 0.7
RONA Sales
Fixed
0.4% 452.24
Assets
Total Net
Operating
Asset Assets 415.53
Profit
Turnover
90.72 9.00% 579.4
Net
EVA Net Assets
Assets
Current
33.81 379.4 379.4
Assets
Interest
Cost of
Free
Capital
Liabilities 163.87
56.91 200
WACC Source: www.my-controlling.de
15.0% only model taken