Shares of Tata group owned Indian Hotels Co. Ltd have fallen 12% in the past fortnight. The proposed rights issue offering one for every five shares held, at a steep discount to the prevailing market price and a buoyant equity market, did little to boost investor sentiment.

What’s interesting is that the Rs1,500-crore raised through the rights issue will be partly used to repay debt. This is in line with the premium hotel chain’s attempt to deleverage the overburdened balance sheet that was hard to service, given the dull state of travel and tourism since FY09.

The recent move to focus on an asset-light business model and sell unviable assets to repay high-cost debt has slowly but surely lowered the consolidated debt:equity ratio from 2.1 in March 2015 to 1.1 in March 2017.

Stand-alone debt to equity profile, too, has improved to 0.6.

Meanwhile, analysts say a part of the rights issue proceeds would be used to renovate the Mumbai Searock Hotel property that would over time churn out good revenue from business travellers. Note that this has been shut since it was bought at an expensive valuation in FY08. That apart, domestic tourism and travel is again gaining ground. Occupancy rates and average room rates have improved in the past two quarters. Meanwhile, the firm’s recent room additions in key leisure destinations in the country should reap benefits.

The stand-alone business looks better than in the past few years. But investors would be happy only when the international subsidiaries that account for nearly 40% of the consolidated revenue do better. At present, the operating margin of the overseas segment is barely 5-6%, and that drags down the overall profitability. Nonetheless, restructuring operations to club most of the overseas properties under one umbrella have made it easier to work towards improving operational efficiency and perhaps even monetizing loss-making assets.

However, this could take some more time. Indeed, the company has certainly built an appetite through improving domestic operations. But, it would take time before investors are fully satisfied. That said, Indian Hotels’ stock is an outperformer in the luxury hotel universe.