Hotels Equity Research

Indian Hotel Industry – Equity Research August - 2013
A RESEARCH ON THE INDIAN HOTEL INDUSTRY

WITH FOCUS ON MAJOR PLAYERS FOR EQUITY
RESEARCH
RESEARCH ON THE
Submitted by:
INDIAN HOTEL
1) Arindam Bagh
INDUSTRY 2) Arindam Das
3) Pavan Kumar
Bharathidasan Institute of Management, Trichy 0|Page

Table of Contents
1. Industry Overview...............................................................................................................................2
1.1 Global Industry Overview............................................................................................................2
1.2 Indian Economy Overview...........................................................................................................4
1.3 Indian Industry Overview.............................................................................................................4
1.4 Industry Metrics...........................................................................................................................6
1.4.1 Occupancy Rates (OR)..........................................................................................................6
1.4.2 Average Daily Rate (ADR).....................................................................................................6
1.4.3 Revenue per Available Room (RevPAR)...............................................................................7
2. Growth Drivers....................................................................................................................................8
2.1 International tourist arrivals........................................................................................................8
2.2 MICE Destination (Meetings, Incentives, Conferencing, Exhibitions)...........................................9
2.3 Government spending to boost growth.......................................................................................9
2.4 Improving economic environment.............................................................................................10
2.5 Increasing spending power........................................................................................................10
2.6 Government Decision to allow FDI............................................................................................11
3. PLAYER PROFILES - Indian Hotels Company Ltd. (IHCL).....................................................................12
3.1 About IHCL.................................................................................................................................12
3.1.1 Key Highlights....................................................................................................................12
3.1.2 Expansion Initiatives..........................................................................................................12
3.2 SWOT.........................................................................................................................................12
3.2.1 Strengths............................................................................................................................12
3.2.2 Weakness...........................................................................................................................13
3.2.3 Opportunities.....................................................................................................................13
3.2.4 Threats...............................................................................................................................14
3.3 Financials...................................................................................................................................15
BALANCE SHEET.....................................................................................................................................15
INCOME STATEMENT.............................................................................................................................16
CASHFLOW STATEMENT........................................................................................................................17
3.4 Ratios...........................................................................................................................................0
3.5 Valuations....................................................................................................................................0
Gordon Growth Model............................................................................................................................1

3.6 Risks and Concerns......................................................................................................................1

3.6.1 Industry Risk........................................................................................................................1
3.6.2 Company specific Risks........................................................................................................2
3.6.3 Risk Mitigation Initiatives.....................................................................................................4
4. PLAYER PROFILES -EIH Ltd...................................................................................................................4
4.1 About EIH.....................................................................................................................................4
4.2 Financials.....................................................................................................................................5
4.3 Ratios...........................................................................................................................................9
4.4 Valuations....................................................................................................................................9
4.5 Risks and Concerns....................................................................................................................10
5. PLAYER PROFILES - Hotel Leela Ventures...........................................................................................11
5.1 About Hotel Leela......................................................................................................................11
5.2 The Numbers at Leela Palace.....................................................................................................11
5.3 Recent Happenings at The Leela................................................................................................12
5.3.1 Corporate Debt Restructuring............................................................................................12
5.3.2 Opening of The Leela, Chennai..........................................................................................13
5.3.3 Pursuing an Asset-Light Strategy........................................................................................13
5.3.4 Monetization of Non-Core Assets......................................................................................14
5.4 SWOT.........................................................................................................................................14
5.5 Concerns in the Leela Palace.....................................................................................................14
5.5.1 Huge debt – a major concern.............................................................................................14
5.5.2 Improper Diversification Plan............................................................................................15
5.5.3 Decreasing Revenues from Managed Hotels.....................................................................15
5.5.4 Over Reliance on few properties for Revenue...................................................................16
5.6 Financials...................................................................................................................................17
1. Industry Overview
1.1 Global Industry Overview
The global hospitality industry found a generally optimistic outlook, despite specific
local concerns. A general rise in tourism and an expansion in both international and

domestic travel in both business and leisure segments are some of the bright spots.
Travel & Tourism’s importance to the wider economy continued to grow in 2012. The
international travel and tourism industry continues to show moderate growth and as
per United Nations World Tourism Organisation (UNWTO) International Tourist Arrivals,
worldwide, grew by 4% in 2012 to reach 1.035 billion from 996 million in 2011. Its
total contribution comprised 9% of global GDP (US $6.6 trillion) and generated over
260 million jobs – 1 in 11 of the world’s total jobs. The industry outperformed the
entire wider economy in 2012, growing faster than other notable industries such as
manufacturing, financial services and retail.
Chart 1: Global tourist arrivals split: Total 1035 (in Millions)
Middle East India

Africa 5% 1%
5%
Americas
16%
Europe
52%
Asia (ex. India)

22%
Source: UNWTO
Growing intergenerational travel and a generally well informed group of travellers who are
taking advantage of new services and are interested in novel destinations present new
opportunities for the industry. International tourist arrivals (overnight visitors) grew by 4%
in 2012 surpassing a record 1 billion tourists globally for the first time in the history. With an
addition of 39 million tourists, international arrivals reached 1035 million, up from 996
million in 2011. Despite the economic challenges, the growth of international arrivals
worldwide is expected to continue in 2013 at a similar to slower pace (3% to 4%).

Potential negative points involve for this industry in emerging economies continued concern
over national economic turbulence and political upheaval & local considerations. In several
countries, but particularly in China, a shortage of well-trained front line and managerial
employees was considered a key issue.
1.2 Indian Economy Overview
The growth in the global economy was weak in 2012 and is expected to stay sluggish in
2013, as fiscal adjustments are expected to slow growth in advanced economies and delay
cyclical recovery in emerging economies. The global economic growth rate reduced to 3.5%
in 2012 compared with 4% in 2011. The situation in India mirrored this global trend. India’s
growth rate fell to 5.5% driven by lower industrial production in core sectors, slow internal
investment, reduced urban consumption and high inflation. The persistent high levels of
inflation adversely impacted consumption while structural bottlenecks affected investments.
The last financial year saw the second consecutive year of decelerating growth and the
uncertainty in the business environment
1.3 Indian Industry Overview
Tourism in India is the most vibrant tertiary sectors and has a strong hold on the economy.
The sector contributes 6.23 per cent to the national gross domestic product (GDP) and 8.78
per cent of the total employment in India. The World Travel and Tourism Council (WTTC)
named India as one of the fastest growing tourism industries for the next 10 to 15 years.
The tourist arrivals in India were registered at approximately 6.65 Million in 2012 based on
the advanced estimates provided by the Ministry of Tourism. The FTA arrivals in India have
grown about 5% over 2011. It is this growth of the tourism industry that drives the growth
of hotels in India. The below chart indicates the growth of foreign tourist arrivals in India
over the last three years.
Chart – 2: Growth of Foreign Tourist Arrivals (FTAs) in India

68
66
64
62
60
58
56
54
52
2010 2011 2012
Source: Ministry of Tourism

The foreign exchange earnings in India as a result of the tourism industry stood at
approximately US$ 17.75 Billion. This has increased at a rate of 7% compared to 2011.
However, in 2011, the FEE was roughly at US$ 16.6 Billion registering a growth of about
16.8% over 2010.
Chart – 3: Growth of Foreign Exchange Earnings (FEEs) in India (in US$ Billion)
20
18
16
14
12
10
8
6
4
2
0
2010 2011 2012
As per WTTC, in India, the total direct and indirect economic impact of the travel and
tourism industry was Rs. 6,385 billion being 6.6% of the GDP and over 39 million jobs.

1.4 Challenges – Declining Industry Metrics
In terms of hospitality industry performance in India, the overall rates, occupancies and
RevPAR are witnessing a decline, owing to the impact of increased supply in the marketplace
and this trend is expected to continue for the next few years, given the gestation period for
new hotel supply. The overall RevPAR for the industry is estimated at Rs. 4,100 which is
lower than the peak RevPAR seen in 2008. The below metrics are used to analyse the sector
& to some extent predict the nature of growth, the sector would witness in the near term.
1.4.1 Occupancy Rates (OR)
OR ratio indicates the number of units in a hotel that have been rented out as compared to
the total number of units available for rent. The converse of this metric, Vacancy Rate is a
ratio that denotes the total number of units that are not rented out. Off late, in India
occupancy rates are roughly around the 60% mark. For the year 2012, the OR decreased
slightly by 1.2% to 58.1%.
1.4.2 Average Daily Rate (ADR)
ADR indicates average realized room rental per day in the hotel industry. ADR is one of the
key metrics to measure the operating performance. All-India average rates decreased in
2012 to roughly about 6900 Rs per day.
1.4.3 Revenue per Available Room (RevPAR)
RevPAR is calculated by multiplying a hotel's average daily room rate (ADR) by its
occupancy rate (OR). It may also be calculated by dividing a hotel's total guestroom
revenue by the room count and the number of days in the period being measured.
RevPAR = OR * ADR
OR – Occupancy Rate
ADR – Average Daily Rate

Table – Consolidated Metrics
Year ARR (in Rs.) OR (in %) Rev. PAR (in Rs.)
2009-10 6,489 59.5 3,681

2010-11 6,400 60.5 3,872
2011-12 6,900 61.5 4,243
2012-13 7,235 61.0 4,450
2013-14E 6,890 59.5 4,100
2014-15F 7,100 60.5 4,296
2015-16F 7,313 61.0 4,461
1.5 Challenges – Excess of Room Supply
Year Total No. of Rooms Organized Sector

2009-10 132,786 62,404
2010-11 141,772 71,531
2011-12 151,824 84,313
2012-13E 162,588 99,489
2013-14F 174,115 117,397
2014-15F 186,460 138,529
2015-16F 199,680 163,464
Hotels Rooms Contribution

5 Star Deluxe 25810 30.61%
5 Star 14059 16.68%
4 Star 12238 14.51%
Heritage 1822 2.16%
3 Star 25905 30.73%
2 Star 3901 4.63%
1 Star 577 0.68%
Total 84313
Year Estimated Supply Estimated Demand

2010-12(Act.) 9,127 6146
2011-12(Act.) 12,782 8,576
2012-13E 15,176 8,836
2013-14F 17,908 9,163
2014-15F 21,132 13,959
2015-16F 24,935 15,903
CAGR 23.00% 20.00%

2. Growth Drivers
2.1 International tourist arrivals
International Tourist Arrivals is one of the major contributors to the hotel industry. Indian
hospitality industry is projected to grow at a rate of 8.8% during 2007-16, placing India as
the second-fastest growing tourism market in the world. Initiatives like massive investment
in hotel infrastructure and open-sky policies made by the government are all aimed at
propelling growth in the hospitality sector. Foreign Tourist Arrivals (FTAs) during the year
2012 was 6.65 mn as compared to FTAs of 6.31 mn during the year 2011 and 5.78 mn in
2010. There has been a growth of 5.4% in the year 2012 over 2011 as compared to a
growth of 9.2% registered in the year 2011 over 2010.
FTAs during the period January-March 2013 were 2.03 mn with a growth of 2.3%, as
compared to the FTAs of 1.98 mn with a growth of 10.9% during January-March 2012 over
the corresponding period of 2011. Refer to Chart – 2 above, for an estimate on the growth
of Foreign Tourist Arrivals (FTAs) in India.
The top three states which attract the most number of FTAs in India are Maharashtra and
Tamil Nadu followed by Delhi with contribution of about 25%, 18% and 11% respectively
(2011). The total number of Foreign Tourist Visits (FTVs) to different states and union
territories in 2011 stands at 19.49 million. The growth in FTVs was 8.8% in the year 2011
over 2010 compared to 24.6% in the year 2010 over 2009. The following table is the state
wise break up of FTVs in 2011 and percentage share of the respective states in the total
FTVs.
Table: – Region wise break up of Foreign Tourist Visits in 2011
Rank State/UT Foreign Tourist Visits in

2011 (in %)
1 Maharashtra 24.7
2 Tamil Nadu 17.3
3 Delhi 11.1
4 Uttar Pradesh 9.7
5 Rajasthan 6.9
6 West Bengal 6.2
7 Bihar 5
8 Kerala 3.8
9 Karnataka 2.9

10 Himachal Pradesh 2.5

Total of top 10 states 90.1
Others 9.9
Total 100
2.2 MICE Destination (Meetings, Incentives, Conferencing, Exhibitions)
Business tourism in the region has been boosted by meetings and exhibitions. This has
emerged as the primary business tourism driver owing to the lower levels of spending that
businesses have to make to hold MICE events in India. To encourage business travel,
governments are taking initiatives like road shows and events to showcase their conference
and exhibition facilities. Mumbai has emerged as one of the top MICE destinations in India
with two major facilities – Bombay Exhibition Centre and Renaissance Convention Centre
that have huge spaces suitable for MICE events.
2.3 Government spending to boost growth
Government collective spending includes general government spending in support of

general tourism activity. These are done at national as well as regional and local
government spending such as tourism promotion, visitor information services, administrative
services and other public services.
Chart: Indication of Government spending in Hotel and Tourism
140
120
100
80
60
40
20
0
2008 2009 2010 2011 2012 2013E
Source: WTTC

2.4 Increasing spending power
The per capita income of India has grown at roughly 8% CAGR which is particularly higher
compared to the world rate of 3.63% during the period 2008-11. Owing to positive
economic conditions, the disposable income levels haven’t come down & the spending
capacity has improved. This is likely to maintain the leisure demand for hotels in India that
mainly arises from domestic travellers.
Chart – Increase of GDP Per Capita
60,000.00
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
0.00
2008 2009 2010 2011E 2012E 2013E 2014E 2015E
Source: IMF
2.5 Government Decision to allow FDI
Government of India is allowing 100% FDI in Hotels and Tourism, through the automatic route
and also identified the investment opportunity of about $8-10 billion over a period of 5 years in
tourism sector. India has significant potential for becoming a major global tourist destination. It
is estimated that tourism in India could contribute Rs.8,50,000 Crores to the GDP by 2020
( approx. 1800 million USD) if you properly plan to develop and invest on Connectivity
Infrastructure, Tourism Infrastructure, Tourism Products, Capacity Building and Promotion &
Marketing (WTTC report). It is estimated there is a need of around 10 Billion US $ required for
development of tourism.
Table: 5 – FDI Inflow in Hotels and Tourism in 2011
Bharathidasan Institute of Management, Trichy 10 | P a g e

Amount of FDI Approved Percentage of Total

Sector
(in Rs Million) FDI Approved
Hotel & Restaurants 408.4 0.12

Tourism 9.9 0
3. PLAYER PROFILES - Indian Hotels Company Ltd. (IHCL)

3.1 About IHCL
The Indian Hotels Company Ltd (IHCL) is a member company of the Tata Group which consists
of other companies viz Tata Motors, Tata Steel, Tata Sponge Iron and others. IHCL is primarily
engaged into business of hoteliering. It also deals in air catering and ready to cook businesses.
The company was incorporated by the founder of the Tata Group, Mr. Jamsedhji N Tata and the
first luxury hotel – The Taj Mahal Palace Hotel, Mumbai was opened in 1903.
3.1.1 Key Highlights
IHCL operates in various different segments viz- luxury, premium, mid-market and value
segment. It offers luxury services with a brand “Taj” for the travelers looking for authentic
luxury experiences. Its “Taj Exotica”, a resort and a spa brand provides relaxing and exotic
experiences, “Taj Safari” hotels provide wildlife luxury experiences. “Vivanta” hotels are
positioned as contemporary and informal luxury hotels. Apart from these luxury hotels and
resorts the company operates through different brands such as “The Gateway Hotel” brand
which is marketed as upscale or mid-market service hotels and resorts. The company’s “Ginger”
hotels are the economy hotels targeting value segment. IHCL through these brands serves to
different segments efficiently.
3.1.2 Expansion Initiatives
The past year witnessed opening of seven new hotels including two ‘Vivanta by Taj’ hotels in
Madikeri, Coorg and in Gurgaon, NCR. IHCL also concluded the soft opening of the Taj Palace
Hotel, Marrakech, Morocco and also increased the Ginger footprint by opening four hotels in
Chennai (Vadapalani), Faridabad, Mumbai (Andheri) and Bengaluru (Koramangala).

3.2 SWOT
3.2.1 Strengths
1. 60 of the hotels have been certified Earth Check ‘Silver’ over last 3 years. Also 9
more hotels will become eligible for GOLD certification which will be a world first.
Last year 7.76% of our total energy consumption was from renewable sources.
2. The Taj Group consistently invests in renovation and refurbishment of its existing
properties to maintain higher standards of service and brand visibility. The Taj Group
has renovated many of its key hotel properties during the past few years and is in
the process of renovating the other key properties in a phased manner.
3. The Taj Group plans to expand its presence in key cities and secondary cities by
entering into management and operating contracts.
4. The Company through its subsidiary Roots Corporation Limited is also increasing its
presence in ‘Budget Hotel’ segment under the brand ‘Ginger’ and in the process
counters the risk of dependence on the high end luxury segment.
5. Group comprises 120 hotels in 65 locations across India with an additional 20
international destinations.
6. Taj Group has also positioned itself to capture the maximum benefit from the
industry boom in India. The group capture brand visibility with its distinct brands
‘Taj’ in the Luxury segment, ‘Vivanta by Taj’ in the Upper Upscale segment, Gateway
in the Upscale segment and ‘Ginger’ in the Economy segment, following its Brand
Architecture initiative.
7. Employee strength over 13,000 people and employee retention due to good brand
image.
3.2.2 Weakness
1. Terrorist attacks left a question over the security.

2. Limited market share due to tough competition from international and domestic players.
3.2.3 Opportunities
1. The Taj Group plans to extend its presence in key international gateway cities as well as
other key international destinations to increase its brand visibility in the international
markets.

2. UNWTO (United Nations World Tourism Organization) expects growth to continue in

2013 at 3% in line with UNWTO long term forecast and Asia Pacific and America is
expected to lead the growth.
3. As per WTTC, Foreign Tourist Arrivals to India are forecasted to grow at a rate of 8% -
9% in the next few years and predict that India will receive 14 million tourists by 2023.
Since FTAs are major source for luxury accommodation, the hotel industry can reap rich
dividends during this period.
3.2.4 Threats
1. The Indian subcontinent, South East Asia and Asia Pacific with high growth rates have
become the focus area of major international chains. Most of the International Hotel
chains have announced their plans to establish hotels to take advantage of the demand
supply imbalance. These entrants are expected to intensify the competitive
environment.
2. Recent competitiveness in international airfares and strengthening financial health of
Indian people resulted in destinations like Europe, South East Asia and Australia
becoming more affordable to the average Indian traveller. This has increased outbound
travel and presents a risk to the domestic segment for leisure resorts.

Research on the INDIAN HOTEL INDUSTRY
3.3 Financials
BALANCE SHEET
(In Rs. Crore)

FY'12 FY'13 FY'14E FY'15E FY'16E FY'17E
SOURCES OF FUNDS
OWNER'S FUND
Equity Share Capital
75.61 80.75 80.75 80.75 80.75 80.75
Share Application Money
124.37 - - - - -
Reserves & Surplus 2, 2, 3, 3, 3, 3,
893.72 898.53 402.53 572.27 766.89 811.48
Minority Interest
646.90 707.72 761.15 857.36 965.85 990.67

NETWORTH 3, 2, 3, 3, 3, 3,
093.70 979.28 483.28 653.02 847.64 892.23

NON-CURRENT 3, 4, 4, 5, 5, 5,
LIABILITIES 894.00 332.17 654.27 242.63 700.01 846.46
Long-term borrowings 3, 3, 3, 4, 4, 4,
083.18 431.18 685.27 151.13 470.40 585.25
Deferred Tax liabilities
130.18 128.79 138.51 156.02 175.76 180.28
Other long-term liabilities
76.61 76.22 81.97 92.34 104.02 106.69
Long-term provisions
604.03 695.98 748.52 843.14 949.83 974.23

CURRENT LIABILITIES 1, 1, 1, 1, 2, 2,
596.94 277.39 486.83 762.91 070.11 120.88
Short-term borrowings
170.02 247.67 366.37 512.68 673.55 690.86
Trade Payable
313.90 319.96 344.11 387.61 436.66 447.88
Other current liabilities
965.43 574.63 618.01 696.13 784.22 804.37
Short-term provisions
147.59 135.13 158.34 166.49 175.67 177.78

TOTAL 9, 9, 10, 11, 12, 12,
(NETWORTH+LIABILITIES 231.54 296.56 385.53 515.92 583.61 850.24
)

USES OF FUNDS
FIXED ASSETS 5, 5, 6, 6, 6, 6,
568.84 808.35 044.05 420.36 692.96 444.84

Gross Block 6, 6, 7, 8, 8, 8,
372.47 830.71 346.37 034.70 543.04 652.79
Less : Revaluation Reserve
- - - - - -
Less : Accumulated 1, 1, 1, 2, 2, 2,
Depreciation 134.51 422.93 733.12 072.38 433.10 798.46
Net Block 5, 5, 5, 5, 6, 5,
237.96 407.78 613.25 962.32 109.94 854.33
Capital Work-in-progress
330.88 400.57 430.81 458.04 583.02 590.51

NON-CURRENT ASSETS 2, 2, 3, 3, 4, 4,
814.86 538.35 267.77 725.85 197.31 305.14
Goodwill on Consolidation
489.51 512.83 551.54 621.27 699.88 717.86
Non-current Investement 1, 1, 2, 2, 2, 2,
841.15 522.61 075.35 333.69 628.99 696.54
Long term loans and advances
431.90 476.42 512.39 577.16 650.19 666.89
Other non-current assets
52.30 26.49 128.49 193.73 218.25 223.85

CURRENT ASSETS 1, 1, 1, 2,
847.84 949.86 073.02 368.79 692.82 099.53
Current investment (Mutual
fund units) 62.75 40.69 43.76 99.29 161.86 472.02
Inventories
86.35 96.74 104.04 117.20 132.02 135.42
Trade receivables
290.38 273.98 294.66 267.91 373.91 383.52
Cash and bank balances
160.26 210.60 277.95 287.22 352.29 418.56
Short term loans and
advances 181.18 256.04 275.37 310.18 349.43 358.40
Other current assets
66.92 71.81 77.23 286.99 323.31 331.62

TOTAL ASSETS 9, 9, 10, 11, 12, 12,
231.54 296.56 384.84 515.00 583.09 849.51
Revenue increased marginally from Rs.3443 cr in FY’12 to Rs.3743 cr in FY’13 although

occupancy of rooms dropped. The increase was due to negligible increase in Average room rate
and addition of available rooms. The average room rates increased by less than 3% while the
number of rooms increased by around 5% in FY’13.
Increase in power and fuel costs as a percentage of total revenues led to decrease in
operating margin, which stood at 21.56% in FY’13 compared to 22.44% in FY’12. Company
recorded net loss of Rs.430 cr in FY’13 against net profit of Rs.3 cr in FY’12 primarily on

account of diminution of investment of Rs.305 cr in the value of its investment in Taj

International Hotels (H.K) Ltd. and Rs.68 cr in investment in Bjets Pte Ltd., Singapore.
INCOME STATEMENT

Occupancy Rate 63% 63% 62% 63% 64% 65%
Average Room rate
5,330 5,495 5,440 5,494 5,549 5,604
No. of rooms
13,654 14,331 15,906 17,459 19,169 19,169
(In Rs. Crore)
Operating Income 3 3 4 4 5 5
,443.53 ,743.36 ,025.95 ,534.88 ,108.71 ,239.96
Room Income
1,673.48 1,810.83 1,958.14 2,205.67 2,484.77 2,548.61
Food, Beverage &
Banqueting 1,381.58 1,501.92 1,607.05 1,810.20 2,039.26 2,091.65
Other Operating Income
388.47 430.61 460.75 519.00 584.67 599.69

Expenses 2 3 3 3 4 4
,898.27 ,205.82 ,447.83 ,883.68 ,375.11 ,487.51
Foods and Beverages
consumed 362.57 381.55 410.35 462.23 520.72 534.09
Fuel, Power and Light
245.68 288.80 310.60 349.87 394.14 404.26
Manufacturing Expenses
479.29 541.43 582.30 655.91 738.91 757.89
Personnel Expenses
1,148.77 1,271.75 1,367.76 1,540.66 1,735.61 1,780.20
Advertising and Publicity
111.55 126.00 135.51 152.64 171.96 176.37
Rent
55.35 61.01 65.62 73.91 83.26 85.40
License Fees
175.10 197.11 211.99 238.79 269.00 275.91
Adminstrative Expenses
319.96 338.17 363.70 409.67 461.51 473.37

Operating Profit
545.26 537.54 578.12 651.20 733.60 752.45
Other Recurring Income
71.38 60.16 64.70 72.88 82.10 84.21

Adjusted PBDIT
616.64 597.70 642.82 724.08 815.70 836.66
Financial Expenses
212.47 170.74 216.49 243.85 274.71 281.77

Depreciation
255.07 288.42 310.19 339.26 360.72 365.36

Adjusted PBT
149.10 138.54 116.14 140.97 180.27 189.54
Tax Charges
121.75 98.86 82.88 100.59 128.64 135.25
Profit attributable to - - - - - -
Minority Interest 38.40 40.86 39.63 39.63 39.63 39.63
Share Profit of Associates
15.64 1.37 8.51 8.51 8.51 8.51
Exceptional items
1.52 430.43 - - - -
Diminution of investment
- 373.00 - - - -
Other adjustment
1.52 57.43 - - - -

Reported PAT -
3.07 430.24 2.14 9.25 20.51 23.16
Earning per share -
0.04 5.50 0.03 0.11 0.25 0.29
Proposed Equity Dividend
75.95 64.60 80.75 80.75 80.75 80.75
Dividend Tax
12.32 10.59 13.12 13.12 13.12 13.12
On a standalone basis, IHCL reported negligible y-o-y growth in net sales in Q1 2013-14
to Rs.396.63 cr with a profit after tax of Rs.9.78 cr compared to Rs.4.00 cr in Q1 2012-13.
CASHFLOW STATEMENT
(In Rs.
Crore)

Net CashFlow-Operating Activity 534.77 501.77 604.46 666.37 740.41 779.97
Net Cash Used In Investing Activity 364.52 (347.25 (375.95 (411.04 (475.45 (486.97)
) ) ) )
NetCash Used in Fin. Activity (1,052.44) (117.32 (184.70 (259.97 (215.56 (230.31)
) ) ) )
Net Inc/Dec In Cash And Equivlnt (153.15) 37.20 43.81 (4.64) 49.40 62.68
Cash And Equivalnt Begin of Year 134.96 85.11 124.14 167.95 163.31 212.71
Adjustment 103.30 1.83
Cash And Equivalnt End Of Year 85.11 124.14 167.95 163.31 212.71 275.39

Reported PAT for FY'14E (in Rs, Cr)
Occupancy rate
60% 61% 62% 63% 64% 65%
1
5,000 0.35 0.59 0.83 1.07 1.31 .55
1
5,100 0.64 0.88 1.13 1.37 1.62 .86
2
5,200 0.93 1.18 1.43 1.67 1.92 .17
2
5,300 1.21 1.47 1.72 1.98 2.23 .49
2
5,400 1.50 1.76 2.02 2.28 2.54 .80
3
5,500 1.79 2.05 2.32 2.58 2.85 .11
3
5,600 2.08 2.35 2.62 2.88 3.15 .42
Movement in operating and net margins

20%
10%
0%
-10%
-20%
Operating Profit Reported PAT

EPS
1.00
Rs./Share -
(1.00)
(2.00)
(3.00)
(4.00)
(5.00)
(6.00)
Revenue Break up
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
-
Room Income Food, Beverage & Banqueting

Other Operating Income

Cost structure break-up
Advertising and Publicity Foods and Beverages

6% consumed
11%
Personnel Expenses Fuel, Power and Light
32% 11%
Other operating cost

40%

3.4 Ratios
PER SHARE RATIOS

Adjusted E P S (Rs.) 0.04 -5.50 0.03 0.11 0.25 0.29
Adjusted Cash EPS (Rs.) 7.04 6.64 7.49 8.25 9.17 9.66
Dividend Per Share 1.00 0.80 1.00 1.00 1.00 1.00
Operating Profit Per Share 7.21 6.66 7.16 8.06 9.08 9.32
(Rs.)
Book Value (Excl Rev Res) Per 40.88 42.22 43.11 45.12 47.39 47.91
Share (Rs.)
Book Value (Incl Rev Res) Per 40.92 36.90 43.14 45.24 47.65 48.20
Share (Rs.)
Net Operating Income Per 45.54 46.36 49.86 56.16 63.27 64.89
Share (Rs.)

PROFITABILITY RATIOS

Operating Margin (%) 15.83% 14.36% 14.36% 14.36% 14.36 14.36%
%
Gross Profit Margin (%) 28.37% 26.76% 26.76% 26.76% 26.76 26.76%
%
Net Profit Margin (%) 0.09% -11.49% 0.05% 0.20% 0.40% 0.44%
Adjusted Cash Margin (%) 15.53% 13.40% 15.01% 14.69% 14.49 14.89%
%
Adjusted Return On Net Worth 0.10% -14.44% 0.06% 0.25% 0.53% 0.60%
(%)
Return on Equity 4% -550% 3% 11% 25% 29%
Return on Assets 0.03% -4.63% 0.02% 0.08% 0.16% 0.18%
Return On long Term Funds 0.10% -12.54% 0.06% 0.22% 0.46% 0.51%
(%)
Cash Return on Assets 5.79% 5.40% 5.82% 5.79% 5.88% 6.07%

LEVERAGE RATIOS

Debt ratio 0.59 0.60 0.59 0.61 0.62 0.62
Long-term Debt to Total 0.98 0.98 0.98 0.98 0.98 0.98
Capitalization
Long Term Debt / Equity 1.26 1.45 1.34 1.44 1.48 1.50
Total Debt/Equity 1.77 1.88 1.76 1.92 2.02 2.05
Financial leverage - 2.98 3.12 2.98 3.15 3.27
Owners fund as % of total 33.51% 32.05% 33.54% 31.72% 30.58 30.29%
Source %
Times Interest Earned 2.57 3.15 2.67 2.67 2.67 2.67
Cash Interest Coverage 4.09 4.52 4.17 4.15 4.16 4.25

LIQUIDITY RATIOS
EQUITY RESEARCH REPORT

Current Ratio 0.42 0.55 0.48 0.49 0.49 0.66
Current Ratio (Inc. ST Loans) 0.53 0.74 0.72 0.78 0.82 0.99
Quick Ratio 0.48 0.67 0.65 0.71 0.75 0.93
Cash flow liquidity ratio 0.59 0.79 0.81 0.77 0.77 0.96
Average Collection period 31 27 27 22 27 27
Days Inventory Held - 13 13 13 13 14
Days Payable Outstanding 48 44 44 44 44 44
Cash Conversion Cycle - -4 -3 -9 -4 -3

ACTIVITY RATIOS

Accounts Receivable Turnover 12 14 14 17 14 14
Accounts Payables Turnover 8 8 8 8 8 8
Inventory Turnover Ratio - 28 27 28 28 27
Fixed Assets Turnover Ratio 0.62 0.64 0.67 0.71 0.76 0.81
Total Asset Turnover 0.37 0.40 0.39 0.39 0.41 0.41

PAYOUT RATIOS

Dividend payout Ratio (Net 24.74 -0.15 37.75 8.73 3.94 3.49
Profit)
Dividend payout Ratio (Cash 0.29 -0.46 0.26 0.23 0.21 0.21
Profit)
Earning Retention Ratio -27.75 1.17 -42.88 -9.15 -3.58 -3.05
Cash Earnings Retention Ratio 0.66 1.53 0.70 0.73 0.75 0.76

COVERAGE RATIOS

Adjusted Cash Flow Time Total 3.15 2.03 1.65 1.30 1.10 1.13
Debt
Financial Charges Coverage 1.59 -0.94 1.39 1.45 1.54 1.56
Ratio
Fin. Charges Cov.Ratio (Post 1.01 -1.52 1.01 1.04 1.07 1.08
Tax)

COMPONENT RATIOS

Material Cost Component(% 10.53% 10.19% 10.19% 10.19% 10.19 10.19%
earnings) %
Personnel Cost Component 33.36% 33.97% 33.97% 33.97% 33.97 33.97%
%
Power & fuel Cost Component 7.13% 7.71% 7.71% 7.71% 7.71% 7.71%
Selling Cost Component 3.24% 3.37% 3.37% 3.37% 3.37% 3.37%
Long term assets / Total 90.82% 89.78% 89.67% 88.11% 86.55 83.66%
Assets %


SALES CONTRIBUTION RATIOS

Room income to Total sales 48.60% 48.37% 48.64% 48.64% 48.64 48.64%
%
F&B income to Total sales 40.12% 40.12% 39.92% 39.92% 39.92 39.92%
%
Other op. income to Total 11.28% 11.50% 11.44% 11.44% 11.44 11.44%
sales %
3.5 Valuations
The Valuation analysis report is valuing the company as per the discounted free cash flow
methodology only.
BASIS OF DISCOUNTED FREE CASH FLOW METHOD (DFCF)
The discounted free cash flow method expresses the present value of the business
attributable to equity share holders as a function of its future cash earnings capacity. The
DFCF methodology is considered to be the most appropriate basis for determining the
earning capability of a business. It expresses the value of the business as a function of
future cash earnings in present value terms. The approach seeks to measure the intrinsic
ability of the business to generate cash attributable to the equity shareholders.
CASHFLOW Rs. In
crore
FY'13 FY'14E FY'15E FY'16E FY'17E

Net Profit Tax (430.24) 2.14 9.25 20.51 23.16
Depreciation and Amortisation 288.42 310.19 339.26 360.72 365.36
Change in Working Capital (376.65) (56.13) (46.74) 39.93 41.95
Capital Expenditure (458.24) (515.66) (688.33) (508.34) (109.74)
Debt Repayment on existing debt (195.25) (309.99) (399.18) (545.69) (559.71)
Fresh Debt raised/repaid 476.04 429.24 772.89 711.18 488.43
FCFE (695.92) (140.20) (12.84) 78.31 249.45
PVIF 0.86 0.75 0.65 0.56
Discounted FCFE -121.14 -9.59 50.51 139.01

Gordon Model
Terminal Value Rs. 4,781.27 cr
PV of Terminal Value Rs. 2,664.57 cr
Value of Equity Rs. 2,723 cr
Number of equity shares 80.75 cr
Value per share Rs. 33.73
Current market price per share Rs. 43.00
Based on the analysis of the company the fair value of the equity shares of the
company should to be sold.
3.6 Risks and Concerns

3.6.1 Industry Risk
1. General economic conditions
The hospitality industry is prone to impacts due to fluctuations in the economy

caused by changes in global and domestic economies, changes in local market conditions,
excess hotel room supply, reduced international or local demand for hotel rooms and
associated services, competition in the industry, government policies and regulations,
fluctuations in interest rates and foreign exchange rates and other social factors. Since
demand for hotels is affected by world economic growth, a global recession could also lead
to a downturn in the hotel industry.
2. Socio-political risks
In addition to economic risks, the Company faces risks from the socio-political
environment, internationally as well as within the country and is affected by events like
political instability, conflict between nations, threat of terrorist activities, occurrence of
infectious diseases, extreme weather conditions and natural calamities, etc. which may
affect the level of travel and business activity.
3.6.2 Company specific Risks
The Company specific risks remain by and large the same as enumerated last year.
These are:
1. Overseas Investments
The Company has made significant investments in hotel assets in the USA as also in
acquiring a stake in an international hotel chain. Such investments are long-term and
strategic. Because of a slowdown in the overseas markets as well, such investments will
need to be nursed over a longer gestation period.
In addition, the Taj Group may face competition in other countries from companies
that may have more experience with hotel operations in such countries or with international
operations generally. The Taj Group may also face difficulties integrating new facilities in
different countries into the existing hotel operations, as well as integrating employees that
are hired in different countries into the Taj Group’s existing corporate culture.
2. Heavy Dependence on India
A significant portion of the Company’s revenues are realised from its Indian
operations, making it susceptible to domestic socio-political and economic conditions.
Moreover, within India, the operations and earnings are primarily concentrated in hotel
properties in five cities.
3. Dependence on the high-end Luxury segment
Luxury hotels contribute a significant proportion of the total revenue and earnings of
the Company. This segment is affected by the international events and travel behaviour and
suffers from high operating leverage. Adverse development affecting these hotels or the
cities in which they operate could have a materially adverse effect on the Taj Group.
4. Competition from International Hotel Chains
The Indian subcontinent, South East Asia and Asia Pacific with high growth rates
have become the focus area of major international chains. Several of these chains have
announced their plans to establish hotels to take advantage of the demand supply
imbalance. These entrants are expected to intensify the competitive environment. The
success of Taj Group will be dependent upon its ability to compete in areas such as room
rates, quality of accommodation, brand recognition, service level, and convenience of
location and to a lesser extent, the quality and scope of other amenities, including food and
beverage facilities.
5. Increased outbound travel
Recent competitiveness in international airfares and strengthening financial health of

Indian people resulted in destinations like Europe, South East Asia and Australia becoming
more affordable to the average Indian traveller. This has increased outbound travel and
presents a risk to the domestic segment for leisure resorts.

6. High Operating Leverage
The industry in general has a high operating leverage which has further increased
with on-going renovations and product upgrades. However, it has been observed that the
Company has been able to earn higher revenues with acceptance of its products in the
market and improved RevPAR (revenue per available room).
7. Foreign exchange fluctuation risks
IHCL also has a portfolio of foreign currency debt, in respect of which it faces
exposure to fluctuations in currency as well as interest rate risks.
8. Shortage of skilled labor
The Taj Group’s operations rely heavily on employees and on the employees’ ability
to provide highquality personal service to guests. Shortage of skilled labour or stoppage
caused by disagreements with employees could adversely affect the Taj Group’s ability to
provide these services and could lead to reduced occupancy or potentially damage the
reputation of the Taj Group.
9. Failure of Taj Group’s acquisition, expansion and development strategy
The Taj Group intends to increase revenues and profit margins by increasing the
number of hotels under management through acquisition of new properties, the expansion
of existing properties and the securing of new management agreements. The Taj Group also
intends to enter into strategic partnerships for development of new services and/or products
within the hospitality sector. Actual supply and demand may differ from the estimates and
projections.
3.6.3 Risk Mitigation Initiatives
IHCL employs various policies and methods to counter these risks effectively, as
enumerated below:
1. The Company has implemented various security measures at all its properties which
inter alia include screening of guest’s luggage, installation of metal detectors etc. to counter
the security risk.
2. Foraying successfully in the mid-market segment, IHCL counters the risk of

dependence on the high end luxury segment. The Company through its subsidiary Roots

Corporation Limited is also increasing its presence in ‘Budget Hotel’ segment under the
brand ‘Ginger’.
3. By extensively improving its service standards, as also renovating and repositioning

all its key properties under new brands ‘Gateway’ and ‘Vivanta by Taj’ the Company
counters the risk from growing competition and new properties. Further, it gains operating
and financial leverage, by expansion through management contracts and leveraging the
strengths of its Associates.
4. Foreign currency exposures and hedges are closely monitored by IHCL in

consultation with its advisors. Net exposures, including those from derivative instruments,
are kept at acceptable levels and within overall limits approved by the Board, which are
subject to regular reviews.
4. PLAYER PROFILES -EIH Ltd

4.1 About EIH
East India Hotels (EIH) Limited is a public limited company, under The Oberoi Group.
Founded in 1934, EIH Limited ("EIH" or the "Company") is engaged primarily in the
operation of hotels and resorts under the ‘Oberoi’ luxury and ‘Trident’ five-star brands in
India and internationally. The Group is also engaged in cruise operations, flight catering,
airport restaurants, travel and tour services, and corporate air charters.
The Company owns a 100 % equity interest in the 6 ‘The Oberoi Hotels’ located in Mumbai,
New Delhi, Kolkata, Bangalore, Udaipur, and Ranthambhore. The Company, through its
subsidiaries/associate companies, also has equity interests in the Oberoi Hotels in Agra,
Jaipur, and Shimla. In addition, it has equity interests in nine hotels that operate under the
Trident brand.
The Company’s international expansion plans include luxury properties in Dubai, Abu Dhabi,
Greece and Morocco, for which it has signed management contracts. EIH owns and operate
Oberoi Flight Services and Oberoi Airport Services, which provides catering and other
services to leading international airlines, and operates restaurants and lounges in a number
of India’s domestic and international airports. EIH’s other businesses include air charter
services through EIH Aviation, a commercial printing press, and a car rental business in
India through its 66.67 % equity interest in Mercury Car Rentals Limited, a venture with Avis
Europe.

Breakup of operating income
25%
40% Room income
Food and beverages
Other operating
income
35%
EIH LIMITED
No. of
Location Hotel rooms

Breakup of Cost Structure
INDIA
Mumbai Trident (Nariman Point) 550
Mumbai Trident(BKC) 436
35% 34%
Mumbai The Oberoi 287 cost
Employee
New Delhi The Oberoi Food 283
and beverages
Kolkata The Oberoi Grand consumed
209
Power and Fuel cost
Bengaluru The Oberoi 160
Selling Cost
Udaipur The Oberoi Udaivilas 87
Other Operating cost
Table - Ranthambhor
e 5% 9% The 17%
Oberoi Vanyavilas 25
No. of
Chennai Trident 167
Rooms Udaipur Trident 143
at EIH Agra Trident 137
Jaipur Trident 134
Ltd.
Himalayas Windflower Hall 85
Agra The Oberoi Amarvilas 102
Jaipur The Oberoi Rajvillas 71
Cochin Trident 85
Shimla The Oberoi Cedil 75
Bhubneshwar Trident 62

EGYPT
Cairo Meena House Oberoi 523
Sahl Hasheesh The Oberoi 96

INDONESIA
Bali The Oberoi 75
Lombok The Oberoi 50
Mauritius The Oberoi 72

SAUDI ARABIA
Madina Madina Oberoi 396
Bharathidasan Institute of Management,
HotelsTrichy
managed by EIH limited 4|Page
Gurgaon The Oberoi 202
Gurgaon Trident 136
Total 4648
Table – Upcoming Hotel Supply at EIH
UPCOMING HOTELS
OPERATIONAL NO. OF
LOCATION HOTEL DATE ROOMS
INTERNATIONAL
Dubai The Oberoi 2013 252
Morocco The Oberoi 2014 84
Casablanca The Oberoi 2015 150
Muscat The Oberoi n.a 70

INDIA
The Oberoi Kabini Jungle
Karnataka Lodge 2013 23
Hyderabad Trident 2013 326
Hyderabad Oberoi 2015 220
Bengaluru The Oberoi n.a 250

Madhya
Pradesh The Oberoi Rajgarh Palace n.a n.a
Pune The Oberoi n.a n.a
Chandigarh The Oberoi n.a n.a
Description FY'11 FY'12 FY'13 FY'14E FY'15E FY'16E FY'17E

Income from operations
Net Sales/Income from Operations 1,251.99 1,407.18 1,468.48 1,472.58 1,720.84 1,972.94 2,223.70
Rooms 519.84 560.49 565.35 566.93 662.51 759.57 856.11
Food and Beverage 417.27 493.41 542.11 543.62 635.27 728.34 820.91
Other Services 256.51 297.16 311.19 312.06 364.67 418.09 471.23
Sale of Printed Materials 58.38 56.16 50.11 50.25 58.72 67.32 75.88
Less: Excise duty
4.2 Financials 0.04 0.28 0.28 0.33 0.38 0.43
Statement of Profit and Loss (All items in Rs. Crores
Other operating Income 44.88 42.04 36.09 36.19 42.29 48.49 54.65
Total 1,296.87 1,449.22 1,504.57 1,508.77 1,763.13 2,021.43 2,278.35
Expenses
Consumption of Provisions, Stores, Wines & others 156.57 181.64 195.09 195.63 228.61 262.10 295.41
Employee Benefit Expense 355.09 368.36 391.84 392.94 459.19 526.46 593.37
Depreciation and Amortisation Expense 116.56 129.76 141.14 141.53 165.39 189.62 213.72
Other Expenses 476.52 541.37 604.10 605.79 707.93 811.64 914.80
Total 1,104.74 1,221.13 1,332.16 1,335.89 1,561.12 1,789.82 2,017.30
Profit/Loss before other income. Finance costs and exceptional items 192.13 228.09 172.40 172.88 202.01 231.61 261.05
Finance Costs 169.08 70.42 71.65 71.85 83.96 96.26 108.49
Profit/Loss before Tax and exceptional items 23.05 157.67 100.75 101.03 118.05 135.35 152.56
Exceptional Items (4.42) 11.15 (15.06) (15.10) (17.65) (20.24) (22.81)
Profit/loss before Tax 18.63 168.82 85.69 85.93 100.40 115.11 129.75
Tax 31.38 48.04 27.06 27.13 31.70 36.34 40.96
Profit/loss after Tax (12.75) 120.78 58.64 58.80 68.70 78.77 88.79
Extraordinary Items - - (11.70) (11.73) (13.71) (15.72) (17.72)
Profit AfterBharathidasan
Tax Before Minority's share of Management, Trichy
Institute (12.75) 120.78 46.94 47.07 54.99 6 | P63.05
age 71.07
Less:minority's Share in Profit after Taxation (4.15) 2.81 12.71 12.75 14.90 17.08 19.25
EIH's Share in Profit/(Loss) (8.60) 117.97 34.23 34.32 40.09 45.97 51.82
Add: Share in Profit of Associates 3.37 4.35 7.55 7.57 8.85 10.15 11.44
Net Profit/loss for the Period (5.24) 120.78 41.78 41.89 48.94 56.12 63.26
FY'11 FY'12 FY'13 FY'14E FY'15E FY'16E FY'17E

Equity and liabilities
Share holders Funds

Capital 114.31 114.31 114.31 114.31 114.31 114.31 114.31
The revenue from rooms has been taken as a growth factor for future estimates, and
Reserves and Surplus 2431.61 2477.46 2481.03 2522.92 2571.86 2627.98 which
2691.24
Share Application money pending allotment 0.44
itself is calculated as a product of rooms, average rent and occupancy rates.
Minority Interest 35.65 41.19 54.78 54.93 64.19 73.59 82.94
Shareholder's funds 2582.01 2632.97 2650.12 2637.23 2686.17 2742.29 2805.55
Room revenue FY'14 FY'15 FY'16 FY'17
Total Rooms
Non-current Liabilities 4,648 5,188 5,728 6,268
Average rent
Long Term Borrowings 5,600 5,768
668.49 347.695,941
381.88 6,119 447.50
382.94 513.06 578.27
Deferred
AverageTax Liabilities-Net 155.08 168.80 170.07 170.55 199.30 228.50 257.54
Other long Term Liabilities 51.39 50.45 46.40
occupancy 60.50% 61.50% 62.00% 62.00% 54.37
46.53 62.34 70.26
Long Term Provisions 12.66 13.63 14.34 14.38 16.80 19.26 21.71
5,669,072,6 6,625,258,6
Non-current Liabilities 887.61 7,595,557,8
580.56 612.688,560,968,1
614.40 717.97 823.16 927.78
Room revenue 40 18 53 08
Current Liabilities
Short term Borrowings 68.85 91.82 289.67 290.48 339.45 389.18 438.64
Trade Payables 73.20 77.10 84.94 85.17 99.53 114.11 128.61
Other Current Liabilities 489.00 243.07 217.51 218.12 254.90 292.24 329.38
Short term Provisions 69.69 81.63 71.91 72.11 84.27 96.62 108.90
Current Liabilities 700.73 493.62 664.02 665.88 778.15 892.15 1005.53
Total Liablilities 4170.35 3707.15 3926.82 3917.51 4182.29 4457.60 4738.86

Balance Sheet (All items in Rs. Crores)
ASSETS
Non-current Assets
Fixed Assets
Tangible Assets 3148.38 3195.15 3405.71 3582.93 3790.03 4027.47 4295.09
Less: Depreciation and Amortisation 733.71 827.19 931.03 1072.56 1237.95 1427.57 1641.29
Net Tangible Assets 2414.67 2367.96 2474.68 2510.37 2552.08 2599.90 2653.80
Intangible Assets 0.75 0.86 1.19 1.19 1.39 1.59 1.79
Capital Work in progress 204.13 316.15 229.98 230.62 269.50 308.98 348.25
Fixed Assets 2619.54 2684.97 2705.85 2742.18 2822.97 2910.47 3003.84
Non-current Investments 116.43 123.33 190.91 171.79 198.99 226.46 253.60
Goodwill on consolidation 304.97 308.81 326.41 327.32 382.51 438.55 494.29
Other Non-current Assets 1.15 0.04 0.04 0.05 0.06 0.07
Long Term Loans and Advances 201.22 199.53 230.68 231.33 270.33 309.93 349.32
Non-current Assets 3242.15 3317.78 3453.88 3472.66 3674.85 3885.47 4101.13
Current Assets
Current Investments 0.00 11.69 10.70 10.73 12.54 14.38 16.21
Inventories 44.60 43.55 45.02 45.14 52.75 60.48 68.17
Trade Receivables 150.12 169.12 205.40 205.98 240.71 275.97 311.05
Cash and Bank Balances 685.41 125.21 152.58 123.59 132.03 141.71 152.62
Bharathidasan Institute
Short Term Loans and of Management, Trichy
Advances 45.87 37.36 55.20 55.36 64.69 7|P
74.17 a83.59
ge
Other Current Assets 2.21 2.43 4.03 4.04 4.72 5.41 6.10
Current Assets 928.20 389.37 472.93 444.84 507.44 572.12 637.74
Total Assets 4170.35 3707.15 3926.81 3917.50 4182.29 4457.59 4738.87

Cash Flow Statement (All items in Rs. Crores)

FY'11 FY'12 FY'13 FY'14E FY'15E FY'16E FY'17E

Cash Flow from Operating Activities
Profit Before Taxation 18.63 168.82 73.99 74.20 86.71 99.41 112.05
Adjustments for
Depreciation 116.56 129.76 141.14 141.53 165.39 189.62 213.72
Non-cash miscellaneous income (4.14)
Effect of exchange rate (8.77) 0.38 14.08
Liabilities written back (0.45) (0.41)
Profit/loss on sale of Fixed Asset (26.98) (3.28) 6.10 6.11 7.14 8.19 9.23
Provision for doubtful advances 0.22 1.34
Provision for dimunition of value of investments 0.05 11.70 11.73 13.71 15.72 17.72
Interest income (6.64) (6.69) (10.39) (10.42) (12.18) (13.96) (15.73)
Dividend Income (2.19) (11.52) (1.08) (1.08) (1.26) (1.44) (1.62)
Interest expenditure 169.08 70.42 71.65 71.85 83.96 96.26 108.49
Operating Profit before working capital changes 255.60 347.64 308.11 293.92 343.47 393.80 443.86
Adjustments for
Trade and other Receivables 123.41 (3.05) (75.24) (75.45) (88.17) (101.09) (113.94)
Inventories (4.89) 1.43 (0.87) (0.87) (1.02) (1.17) (1.32)
Trade Payables 24.61 (17.56) 6.48 6.50 7.60 8.71 9.82
Cash generated from operations 398.73 328.46 238.48 224.10 261.88 300.25 338.42
Interest paid - - - - - -
Payment of direct taxes (36.40) (50.67) (31.25) (31.34) (36.62) (41.98) (47.32)
Net cash from operating activities 362.34 277.79 207.23 192.76 225.26 258.27 291.10
Cash Flow from investing activities

Purchase of fixed assets (237.04) (190.97) (176.72) (177.22) (207.10) (237.44) (267.62)
Sale of fixed assets 66.67 14.35 10.00 10.03 11.72 13.44 15.15
Purchase of Investments (210.18) (22.91) (73.85) (74.05) (86.53) (99.21) (111.82)
Loan to Associate 32.00
Interest Received 4.23 5.44 12.59 12.63 14.76 16.92 19.07
Sale of investments 0.48 (10.70) (10.73) (12.54) (14.38) (16.21)
Decrease in advance for Capital Contract 0.70 0.15 0.15 0.18 0.21 0.24
Increase/(Decrease) in other Bank balances (21.61) (6.24) (4.05) (4.06) (4.74) (5.43) (6.12)
Dividend Received 2.19 19.49 1.08 1.08 1.26 1.44 1.62
Cash Flow from Investing Activities (363.26) (180.14) (241.49) (242.17) (282.99) (324.45) (365.69)
Cash Flow from Financing Activities

Proceeds from Rights issue of Equity Shares 1,178.86 - - - - - -
Share Issue Expenses (11.11) - - - - - -
Proceeds from issue of Share Capital 13.96 28.103
Proceeds from Borrowings
Term Loan 471.65 76.70 392.599 393.70 460.08 527.48 594.52
Cash Credit - 10.26 65.30 65.48 76.52 87.73 98.88
Loan from finance companies 20.85
Proceeds from advance against equity 0.44
Short term Borrowing 0.18 78.00 78.79
Inter Corporate Deposits 86.97
Unsecured Loan 7.52 1.00 50.00 50.14 58.59 67.17 75.71
Repayment of
Term Loan (721.40) (627.19) (363.39) (364.40) (425.84) (488.23) (550.28)
Inter Corporate Deposits (73.12)
Cash Credit (53.24) (8.61) (3.00) (3.01) (3.52) (4.04) (4.55)
Short term Borrowing (55.78) -
Unsecured Loan (84.97) (4.43) (51.50) (51.64) (60.35) (69.19) (77.98)
Loan from finance companies (15.43)
Loan syndication fees and upfront fees (0.05)
Interest paid (171.90) (79.47) (76.97) (77.19) (90.20) (103.41) (116.55)
Dividend Paid (53.92) (61.56) (68.13) (68.32) (79.84) (91.54) (103.17)
Tax on Dividend (7.62) (8.81) (9.20) (9.22) (10.77) (12.35) (13.92)
Cash Flow from Financing Activities 559.86 (665.94) 56.46 56.62 66.17 75.86 85.50
Net increase/decrease in cash and cash equivalents 558.94 (568.29) 22.20 7.21 8.44 9.68 10.91
Cash and Cash Equivalents at the beginning of the year 103.53 662.47 94.18 116.38 123.59 132.03 141.71
Cash and Cash Equivalents at the end of the year 662.47 94.18 116.38 123.59 132.03 141.71 152.62

4.3 Ratios

PER SHARE RATIOS
Adjusted E P S (Rs.) 2.11 1.03 1.03 1.20 1.38 1.55
Adjusted Cash EPS (Rs.) 4.86 3.63 3.37 3.94 4.52 5.09
Operating Profit Per Share (Rs.) 3.36 3.99 3.02 3.02 3.53 4.05
Net Operating Income Per Share (Rs.) 22.69 25.36 26.32 26.40 30.85 35.37
PROFITABILITY RATIOS
11.46 11.46 11.46
Operating Margin (%) 15.74% % % 11.46% % 11.46%
87.47 87.03 87.03
Gross Profit Margin (%) 87.93% % % 87.03% % 87.03%
Net Profit Margin (%) -0.98% 8.33% 3.90% 3.90% 3.90% 3.90%
19.17 13.77 12.78
Adjusted Cash Margin (%) 27.94% % % 12.78% % 12.78%
Adjusted Return On Net Worth (%) -0.20% 4.59% 1.58% 1.59% 1.82% 2.05%
Return on Assets(%) 3.26% 1.06% 1.07% 1.17% 1.26% 1.33%
10.94 10.94 10.94
Return On long Term Funds (%) 34.74% % % 10.94% % 10.94%
LEVERAGE RATIOS
14.41 14.52 18.71
Long Term Debt / Equity 13.21% % % 16.66% % 20.61%
25.34 25.54 32.90
Total Debt/Equity 16.69% % % 29.30% % 36.25%
81.22 81.10 76.91
Owners fund as % of total Source 81.93% % % 78.91% % 75.15%
Times Interest Earned 1.14 3.24 2.41 2.41 2.41 2.41
LIQUIDITY RATIOS
Current Ratio (Inc. ST Loans) 0.79 0.71 0.67 0.65 0.64 0.63
Current Ratio (ex. ST Loans) 0.97 1.26 1.18 1.16 1.14 1.12
Quick Ratio 0.70 0.64 0.60 0.58 0.57 0.57
ACTIVITY RATIOS
Accounts Receivable Turnover 2.27 2.01 1.83 1.97 1.96 1.94
Accounts Payables Turnover 4.82 4.64 4.43 4.77 4.73 4.69
Inventory Turnover Ratio 8.22 8.49 8.37 9.01 8.93 8.85
Fixed Assets Turnover Ratio 0.15 0.16 0.15 0.17 0.20 0.22
Total Asset Turnover 0.09 0.10 0.10 0.11 0.12 0.12
COVERAGE RATIOS
Adjusted Cash Flow Time Total Debt 3.03 0.72 0.66 0.66 0.66 0.66
Financial Charges Coverage Ratio 3.40 1.96 1.96 1.96 1.96 1.96
Fin. Charges Cov.Ratio (Post Tax) 2.72 1.58 1.58 1.58 1.58 1.58
COMPONENT RATIOS
12.97 12.97 12.97
Material Cost Component(% earnings) 12.53% % % 12.97% % 12.97%
26.04 26.04 26.04
Personnel Cost Component 25.42% % % 26.04% % 26.04%
Long term assets / Total Assets 89.50% 87.96 88.64 87.87% 87.17 86.54%

% % %
SALES CONTRIBUTION RATIOS

37.58 37.58 37.58
Room income to Total sales 38.68% % % 37.58% % 37.58%
36.03 36.03 36.03
F&B income to Total sales 34.05% % % 36.03% % 36.03%
26.39 26.39 26.39
Other services & op. income to Total sales 27.28% % % 26.39% % 26.39%
4.4 Valuations
EIH LIMITED
Net Profit after Tax 58.64 58.80 68.70 78.77 88.79

Depreciation and Amortisation 141.14 141.53 165.39 189.62 213.72
Change in Working Capital 114.21 0.96 58.11 59.00 58.67
Capital Expenditure - 210.56 - 177.22 - 207.10 - 237.44 - 267.62
Debt Repayment on existing debt - 417.88 - 419.05 - 489.71 - 561.46 - 632.81
Fresh Debt raised/repaid 673.66 509.32 595.19 682.38 769.11

Valuation 0 1 2 3 4
FCFE 359.18 114.34 190.58 210.87 229.86
PVIF 1.00 0.89 0.79 0.71 0.63
Discounted FCFE 101.85 151.21 149.04 144.71
Eq. Cap. Model Gordon Model

Terminal Value 1874.17 3110.74
PV of Terminal Value 1179.88 1958.36
Sum of discounted FCFE 1726.69 2505.17
Value of Equity 1,727 2,505
Number of equity shares 57.16 57.16
Value per share 30.21 43.83
Current market price per share 49.35 49.35
Analyst Recommendation SELL SELL
4.5 Risks and Concerns
 Fixed costs of operating hotels: The fixed costs associated with owning
hotels, including committed maintenance costs, property taxes, leasehold
payments and maintaining minimum levels of services may be significant. The
business can be unable to reduce these fixed costs in a timely manner in response

to changes in demand for services, and failure to adjust our fixed costs may
adversely affect our business, financial condition and results of operations.
 Revenue coming primarily from Mumbai and New Delhi Hotels: The
hotels in Mumbai and New Delhi historically accounted for approximately 50% of
revenues, and a decline in the business of these hotels, such as that following the
terrorist attacks at the Mumbai hotels in November 2008, would affect the
business adversely.
 Increased competition from other Asian and international destinations:

Although, the company has expanded the operations outside India, a majority of
hotels are located in India. South East Asia, the Asia Pacific region and areas of
the Middle East have become the focus of major international hotel chains and
have developed significantly in recent years as popular tourist destinations. These
regions are also witnessing an increased growth in business. India, as a tourist
and business destination, will face competition from such other regions and may
become less attractive to both tourists and business travellers. This may have an
adverse impact on the business.
 Control of hotels: The Company has developed hotel properties managed

through joint venture partnerships and minority investments in third parties and it
may continue to do so in the future. Moreover, it currently has certain joint
ventures and other hotel investments in which we do not have a controlling
ownership percentage. For example, it owns a minority interest in EIH Associated
Hotels Limited, which owns six Trident hotels and two of The Oberoi hotels. Such
minority interest does not provide the company with the control rights that it
would had if it had owned or had majority interests in these entities.
 The company does not own ― The Oberoi and the ― Trident brands but
are dependent on them: The business depends on the widely recognized
―The Oberoi and ―Trident brand names. The rights to brand names and
trademarks are a crucial factor in marketing products. Establishment of ―The
Oberoi and ―Trident brands in India and globally is material to the company’s
operations. It has entered into royalty agreements, under which it is entitled to
use The Oberoi and Trident names, logos and insignias with regard to hotels and

other company divisions. The royalty fee to use these names is 1% of our revenue
from operations where these brands are used.
5. PLAYER PROFILES - Hotel Leela Ventures

5.1 About Hotel Leela
The Leela Palaces, Hotels and Resorts is owned and managed by Hotel Leela Venture
Limited which was established in 1987 in Mumbai. The company is part of The Leela Group
whose portfolio includes luxury hotel and resort properties, IT and business parks, as well as
real estate development. The Leela Palaces, Hotels and Resorts comprise a collection of
luxury hotels and resorts in New Delhi, Mumbai, Bangalore, Gurgaon, Udaipur, Goa and
Kovalam. New hotel will soon open in Chennai with plans to develop hotels in Agra, Lake
Ashtamudi (Kerala) and Jaipur.
5.2 The Numbers at Leela Palace
Hotel Leela No. of Rooms

Owned Hotels: 2011 2012 2013
The Leela Palace, New Delhi - 260 258
The Leela, Mumbai 392 392 390
The Leela Palace, Bangalore 357 357 357
The Leela, Goa 186 206 206
The Leela Palace, Udaipur 80 80 80
The Leela Kovalam Beach, Kerala 182 - -
The Leela Palace, Chennai - - 326
Total 1,197 1,295 1,617
Managed Hotels:
The Leela Kempinski, Gurgaon 412 412 411
The Leela Kovalam Beach, Kerala - 183 183
Total 412 595 594
Grand Total 1,609 1,890 2,211
Source: Company Reports
Hotel Leela No. of Rooms Occupancy Rate

Owned Hotels: 2011 2012 2013 2011 2012 2013
The Leela Palace, New Delhi - 260 258 - 35% 35%
The Leela, Mumbai 392 392 390 72% 76% 76%
The Leela Palace, Bangalore 357 357 357 69% 67% 67%
The Leela, Goa 186 206 206 71% 73% 73%
The Leela Palace, Udaipur 80 80 80 24% 30% 30%
The Leela Kovalam Beach, Kerala 182 - - 67% - -
The Leela Palace, Chennai - - 326 - - 40%
Total 1197 1,295 1617 66.98% 61.97% 57.56%

Hotel Leela ARR (in Rs.) Revenue (in Crores.)

Owned Hotels: 2011 2012 2013 2011 2012 2013
The Leela Palace, New Delhi - 15,843 15,843 - 53 52
The Leela, Mumbai 8,526 8,535 8,535 88 93 92
The Leela Palace, Bangalore 11,594 11,521 11,521 104 101 101
The Leela, Goa 11,115 13,854 13,854 54 76 76
The Leela Palace, Udaipur 21,004 19,092 19,092 15 17 17
The Leela Kovalam Beach, Kerala 8,155 - - 36 - -
The Leela Palace, Chennai - 16,000 - - 19
Total 10,621 12,324 13,065 297 339 357
Source: Company Reports, Estimates
5.3 Recent Happenings at The Leela
5.3.1 Corporate Debt Restructuring
Hotel Leela had applied for corporate debt restructuring (CDR) in February 2012. The
restructured repayment plan of the company was accepted by the lenders. It has received a
24-month moratorium for the outstanding principal amount of Rs 3,000 crore it borrowed
from a consortium of 17 banks. At the September 12 CDR meeting held with the banks, The
Leela was told to repay all its outstanding principal amount in eight years from January
2014. It also has to pool in all its hotel properties (other than the Bangalore hotel) as
security against the loan amount from the CDR lenders. The pooled securities include the
company’s hotels in Mumbai, Goa, Udaipur, Delhi and Chennai. In terms of the CDR
package, the Company is required to reduce its debts by selling a Hotel in FY 2013-14, and
also by selling / monetising its non-core assets like the land in Hyderabad, land in Bangalore
and IT Park in Chennai.
5.3.2 Opening of The Leela, Chennai
Despite the challenging business environment, Hotel Leela were able to open Chennai's first
sea - facing palace hotel, The Leela Palace Chennai. The Hotel is developed on a 4.8 acre
plot, which faces the Bay of Bengal and Adyar River. Drawn from the inspiration of
Chettinad Dynasty, the architecture of the Palace Hotel exudes the regal and opulent style,
the 11-storeyed hotel features 326 rooms and suites and is equipped with world-class
amenities. The Leela Palace Chennai is a luxurious experience, evoking the rich heritage of
Chettinad architecture in terms of grandness and space. Facilities and guestrooms are world
class with distinctive amenities and cutting edge technology. With Chennai booming as a
commercial centre, it is our aim to make the hotel a natural choice for discerning business
and leisure travellers, celebrities and dignitaries.

5.3.3 Pursuing an Asset-Light Strategy
The Company is adopting an “Asset Light Strategy” for future growth. Pursuant to this
strategy, the Company plans to operate hotels through Management Contracts, instead of
owning the hotels. The Company has executed a MoU with Bhartiya City Developers Private
Limited, which is constructing a luxury hotel with 250 guest rooms, Residences and a
Convention Centre in Bangalore. The Company has also executed a MoU with Supertech
Realtors Private Limited, to manage a Palace Hotel in Noida with 250 guest rooms and
Residences. These hotels are expected to be operational within next 3 to 4 years. The
Company, through its subsidiary / associates, had earlier acquired land in Agra for
constructing a hotel facing the Taj Mahal and also land near Lake Ashtamudi, Kerala for
construction of a backwater resort. The Company is planning to enter into joint venture with
investors who can build hotels without further investment by the Company so that the
Company can manage and operate these hotels under long term management contracts.
Earlier, on 11 August 2011, Hotel Leela had sold its iconic property on Kovalam beach in
Thiruvananthapuram, Kerala, for Rs.500 crore to non-resident Indian Ravi Pillai, who gave
the contract to run the hotel to Hotel Leela for 30 years. However, it is to be noted that
Hotel Leela adopting an Asset Light Strategy would decrease the revenues considerably.
5.3.4 Monetization of Non-Core Assets
The Leela has entered into an agreement for sale of Chennai I. T. Park for 170.17 Crores on
February 2013 with RIL and has received advance of Rs. 120.17 Crores. The sale is
expected to be completed by September 2013. The Leela also plans to sell its 3.84 acres
land in Hyderabad during the current year.

5.4 SWOT
STRENGTHS
WEAKNESS
Good presence in the
Huge Debt burden as a
industry over a period of
result of expansion plans.
32 years.
Heavy dependence on a
Recognized brand name in
few specific locations in
the upscale segment
India and on higher luxury
thereby attracting
segment.
business and tourists.
RISKS
OPPORTUNITIES
Running Hotels under
Management Contract
Rise in FTA's and FEE's Route would lower the
revenues.
CDR scheme approval to Decelerating growth of the
help manage finance Indian Economy and
costs. upcoming supply by
competitors.
5.5 Concerns in the Leela Palace
5.5.1 Huge debt – a major concern
From being a debt free company in 2004, to a debt of about 4500 Crores, Hotel Leela’s
mounting debts is a big concern for both investors and lendors. Hotel Leela’s debts have
been mounting on account of the upgrading plans that the company had undertaken to
operate its hotels from various locations. Cost of the project at Delhi and Chennai is
expected to have costed Leela about 3500 Crores and a major chunk of this amount has
been incurred as debt. Hotel Leela has recently entered into an agreement with it’s lenders
for Corporate Debt Restructuring so as to increase the loan pay back duration and reducing
the Interest rates.
Figure indicating the Increasing Debt at The Leela Hotels.

5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
2008 2009 2010 2011 2012 2013
5.5.2 Improper Diversification Plan
Until 2009, Hotel Leela’s presence was only at 4 locations. For a company with about 28
years in the industry, a proper diversification plan was missing to propel sustainable growth.
It’s property in Bangalore near the old Bangalore airport contributed heavily to its revenues.
The company should have planned expansion and diversification pre-2005, so that it could
have capitalized when the boom in the hotel industry came over from 2006-2009.
Unfortunately, this is the period in which Hotel Leela planned for expansion and thus it has
been hit back due to the delay. Further more, the economy slump has made Leela difficult
to pay back the debt resulting in mounting debt amounts and finance costs. It has to be
noted that Leela paid 400 Crores over the last year in just finance costs which is rougly 80%
of it’s revenue stream.
5.5.3 Decreasing Revenues from Managed Hotels
As Leela plans to expand through the Management Contract Route, there is likely to be a
decrease in revenue over the upcoming years. Below figure indicates that Hotel Leela
currently earns far less revenues from it’s management contract properties than it does from
the Owned Rooms. Hence the path taken by the company may not prove a right strategy
over the long term as it is under pressure to earn more to service it’s huge debt burden.
Figure – Decreasing Revenue stream from Managed Hotels

355.86
400.00 308.85
259.93
300.00
200.00
100.00 18.69 18.66 15.56
-
2011 2012 2013
Room Revenue Revenue from Managed Hotels
5.5.4 Over Reliance on few properties for Revenue
The Leela’s revenues are dependent heavily on its Bangalore and Mumbai hotels.
Below is a chart indicating the revenue stream from various locations as of 2013.
Before 2008, the situation was much problematic as Bangalore hotel alone
contributed to about 45% of it’s revenue streams. The Hotels in Udaipur, Delhi and
Chennai are yet to establish a strong presence in their respective markets.
Figure – Leela’s revenue across locations
The Leela
The Leela
Palace,Palace,
Udaipur
The Leela, New Delhi
Goa 5% 15%
23%
The Leela,
Mumbai
The Leela 27%
Palace,
Bangalore
30%

5.6 Financials
Statement of Profit and Loss (Figures in Lakhs)

Description FY'11 FY'12 FY'13
Operating Income 525.82 571.84 653.86
Room Income 259.93 308.85 355.86
Food & Beverages 145.29 171.45 203.80
Other Income 84.01 91.54 94.20
Expenses 369.66 553.27 541.19
Cost of Materials consumed 35.56 42.99 51.02
Employee Benefit Expenses 114.50 174.86 186.64
Power and Fuel 44.46 51.26 65.09
Other Expenses 175.14 284.16 238.44
Operating Profit 156.16 18.57 112.67
Other Recurring Income 27.53 16.60 6.69
Adjusted PBDIT 183.69 35.17 119.36
Financial Expenses 57.63 321.25 405.34
Interest Expense on TL 44.05 315.84 388.27
Interest Expense on WC 11.09 2.31 5.48
Other Borrowings 2.49 3.10 11.59
Depreciation 68.43 102.24 138.67
Adjusted PBT 57.63 (388.32 (424.65)
)
Tax Charges 18.75 4.72 12.09
Exceptional Items - - (3.29)
Discontinuing Operations - 411.66 -
Reported PAT 37.84 18.62 (433.45)
Source: Annual Reports
Balance Sheet for past 3 years. (Figures in Lakhs)
Description FY'11 FY'12 FY'13

Shareholders’ funds
Share capital 7,756.50 7,756.50 8,373.02
Reserves and surplus 202,531.21 151,306.97 113,887.62
Total 210,287.71 159,063.4 122,260.64
7
Non-current liabilities
Long term borrowings 348,618.58 355,569.57 271,431.88
Deferred tax liabilities (net) 14,795.68 14,563.10 12,252.92
Other long term liabilities 1,247.99 1,624.40 2,111.83
Long term provisions 8,080.03 1,537.82 2,017.39
Total 372,742.28 373,294.8 287,814.02
9
Current liabilities
Short term borrowings 3,182.58 8,824.17 33,372.14
Trade payables 2,587.81 3,283.58 4,488.75

Other current liabilities 38,856.10 70,268.20 186,709.84

Short term provisions 2,106.20 10,270.96 513.54
Total 46,732.69 92,646.91 225,084.27
Total Liabilities 629,762.68 625,005.2 635,158.93
7
ASSETS
Non-current assets
Fixed assets
Tangible assets 406,768.10 446,472.99 543,397.46
Intangible assets 135.53 830.34 947.28
Capital work-in-progress 155,165.91 110,397.43 16,603.30
Fixed assets held for sale 0 0 15,591.13
Total 562,069.54 557,700.7 576,539.17
6
Non-current investments 4,614.08 4,624.38 4,624.38
Foreign currency monetary translation difference - 6,424.22 8,762.94
Long term loans and advances 37,186.40 23,765.00 19,879.27
Other non-current assets 3,560.32 3,575.42 3,575.42
Total 607,430.34 596,089.7 613,381.18
8
Current Assets
Current investments - 10,009.20 -
Inventories 5,438.09 5,984.67 7,133.70
Trade receivables 4,643.86 5,377.90 5,884.49
Cash and cash equivalents 5,626.07 1,641.50 3,542.62
Short term loans and advances 6,279.35 5,282.52 4,702.01
Other current assets 344.97 619.7 514.93
Total 22,332.34 28,915.49 21,777.75
Total Assets 629,762.68 625,005.2 635,158.93
7
Source: Annual Reports
Cash Flow Statement (Figures in Rs. Lakhs)
Particulars FY11 FY'12 FY'13

Profit after Tax 37.8 18.6 -433.5
Add: Depreciation 81.4 102.2 138.7
(Inc)/dec in Current Assets -148.6 32.7 40.6
Inc/(dec) in CL and Provisions 1.4 126.9 -77.4
Others 23.1 23.1 5.4
CF from operating activities -5 49.7 -326.3
(Inc)/dec in Investments 0 0 0
(Inc)/dec in Fixed Assets -884.2 110 -327
Others 14 14 21.7
CF from investing activities -872.2 124 -305.3
Issue/(Buy back) of Equity 2 0 6.2

Inc/(dec) in loan funds 924.5 571.01 563.9

Dividend paid & dividend tax -9.7 -9.7 -9.7
Inc/(dec) in Sec. premium 3 0 9.4
Others 0.4 777.8 89.9
CF from financing activities 920.3 218.2 659.6
Net Cash flow 41.1 -39.8 19
Opening Cash 15.1 56.2 16.4
Closing Cash 56.2 16.4 35.4

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Indian Hotel Industry – Equity Research August - 2013

A RESEARCH ON THE INDIAN HOTEL INDUSTRY

Bharathidasan Institute of Management, Trichy 0|Page

Bharathidasan Institute of Management, Trichy 1|Page

3.6 Risks and Concerns......................................................................................................................1

1.1 Global Industry Overview

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Chart 1: Global tourist arrivals split: Total 1035 (in Millions)

Middle East India

Asia (ex. India)

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1.2 Indian Economy Overview

1.3 Indian Industry Overview

Bharathidasan Institute of Management, Trichy 4|Page

Source: Ministry of Tourism

Source: Ministry of Tourism

Bharathidasan Institute of Management, Trichy 5|Page

1.4 Challenges – Declining Industry Metrics

1.4.2 Average Daily Rate (ADR)

1.4.3 Revenue per Available Room (RevPAR)

Bharathidasan Institute of Management, Trichy 6|Page

Table – Consolidated Metrics

Year ARR (in Rs.) OR (in %) Rev. PAR (in Rs.)

2009-10 6,489 59.5 3,681

1.5 Challenges – Excess of Room Supply

Year Total No. of Rooms Organized Sector

Hotels Rooms Contribution

Year Estimated Supply Estimated Demand

Bharathidasan Institute of Management, Trichy 7|Page

Rank State/UT Foreign Tourist Visits in

Bharathidasan Institute of Management, Trichy 8|Page

10 Himachal Pradesh 2.5

2.2 MICE Destination (Meetings, Incentives, Conferencing, Exhibitions)

2.3 Government spending to boost growth

Government collective spending includes general government spending in support of

Chart: Indication of Government spending in Hotel and Tourism

Bharathidasan Institute of Management, Trichy 9|Page

2.4 Increasing spending power

Chart – Increase of GDP Per Capita

2.5 Government Decision to allow FDI

Table: 5 – FDI Inflow in Hotels and Tourism in 2011

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Amount of FDI Approved Percentage of Total

Hotel & Restaurants 408.4 0.12

3. PLAYER PROFILES - Indian Hotels Company Ltd. (IHCL)

3.1.1 Key Highlights

3.1.2 Expansion Initiatives

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1. Terrorist attacks left a question over the security.

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2. UNWTO (United Nations World Tourism Organization) expects growth to continue in

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(In Rs. Crore)

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Revenue increased marginally from Rs.3443 cr in FY’12 to Rs.3743 cr in FY’13 although

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account of diminution of investment of Rs.305 cr in the value of its investment in Taj

FY'12 FY'13 FY'14E FY'15E FY'16E FY'17E

Bharathidasan Institute of Management, Trichy 16 | P a g e

Bharathidasan Institute of Management, Trichy 17 | P a g e

Movement in operating and net margins

Operating Profit Reported PAT

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Room Income Food, Beverage & Banqueting