In the quarter ended March, Indian Hotels Co. Ltd’s stand-alone business reported healthy revenue of Rs443 crore, around 1% higher than in the December quarter. But Ebitda (earnings before interest, tax, depreciation and amortization) margin fell by around 200 basis points to 32.4% from 34.5% in the December quarter. As a result, Ebitda fell 5% sequentially, disappointing the markets. Indian Hotels’ share price fell by around 4% on a day the markets rose 2.3%. It must be noted here, however, that the firm accounted for the last tranche of insurance claims related to the Taj Palace hotel in the December quarter, and adjusted for this income, the drop in margin is only around 50 basis points.

One basis point is one-hundredth of a percentage point.

The firm also reported consolidated results for the fiscal ended March, which again were disappointing. While on a stand-alone basis it reported a pre-tax profit (before exceptional items) of Rs167 crore, on a consolidated basis, it reported a loss of Rs99 crore. The firm’s consolidated revenue is 75% higher than the stand-alone revenue and, hence, its performance at the consolidated level assumes significance. Citigroup Research had estimated a pre-tax profit of Rs169.7 crore in a January report and had said the consolidated results for the year ended March will be disappointing. But the disappointment is worse than expected.

Indian Hotels’ shares had risen to a high of Rs118 each in mid-May, but have since corrected by around 16%. Even so, since October last year, its shares have outperformed the market, rising by around 30%, compared with a drop of around 3% in the Nifty.

After the weak consolidated performance, which includes its overseas subsidiaries, the stock should be more subdued, especially since valuations are stretched at around 26 times estimated earnings for 2010-11. And while the firm has been able to raise some low-cost debt, its high debt position continues to cause some worry. On a consolidated basis, it has a debt of Rs4,000 crore and an interest cover ratio of only around 1.1.

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