The Indian Hotels Co. Ltd has reported decent results for the first half of the current fiscal year. Revenue increased by 10.6% on the back of an 8% increase in volumes and a 2% rise in average room rates.

A guest relaxes poolside at the Taj Mansingh Hotel in New Delhi. Photo: Bloomberg.

In the first half, which includes the seasonally weak September quarter, margins improved by 100 basis points, leading to an 18% increase in earnings before interest, tax, depreciation and amortization. One basis point is one-hundredth of a percentage point.

What’s more, interest costs fell by 28%. As a result, the company reported a sharp improvement in its pre-tax profit compared with the loss it reported in the year-ago period.

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It’s interesting to note that Indian Hotels’ debt burden has remained the same at around 2,330 crore on a year-on-year basis. Even so, the company has replaced short-term debt with long-term loans, leading to a reduction in interest costs. With interest costs coming down, the company’s profit for the year is likely to look much better.

But note here that all this pertains to the company’s stand-alone results. Indian Hotels doesn’t report consolidated results until the closure of the fiscal year, and the overall picture is likely to be bleak, as it was last year.

In fiscal 2011, the company’s overseas subsidiaries nearly wiped out all the gains made by the parent company. The parent company reported a pre-tax profit of 228 crore, while all of the subsidiary and associate companies reported a cumulative loss of 190 crore. Given the slowdown in the developed markets, it seems unlikely that performance of the overseas units will improve soon.

According to a Reuters report, Anil Goel, the company’s chief financial officer, said in a post-results conference that there was some stress in the US and the company hoped to turn around operations in 14-15 months.

Given this backdrop, it’s unlikely that investors will be excited about the improvement in the stand-alone performance.

As it is, the company’s stock has underperformed the market in the past year, having fallen by 30%, while the broader markets have corrected by a much lower 10.5%.