Back2nd covid wave drags Indian Hotels Co. back to operating losses
Indian Hotels made a loss of Rs149 crore at the Ebitda level. For perspective, Ebitda loss stood at Rs266 crore in Q1FY21 and the company had reported an Ebitda profit of Rs71 crore in Q4FY21
PremiumHotel firms have been suffering since the covid-19 pandemic began. Various restrictions owing to the coronavirus have meant that occupancies took a sharp beating. The second wave halted the recovery path and this shows in The Indian Hotels Co. Ltd’s June-quarter results (Q1FY22).
Consolidated revenues of ₹345 crore were 44% lower than the March quarter.
Of course, the year-on-year growth looks sharp due to a favourable base. Even so, it’s worth noting here that the impact of the second wave hasn’t been as severe as the first one last year. This has cushioned Indian Hotels’ performance this time around. Growth in Q1FY22 was driven by domestic leisure demand.
Analysts from Motilal Oswal Financial Services Ltd said in a report on 10 August, “Despite the second covid wave, standalone RevPAR nearly doubled as compared to last year due to ARR growth and occupancy improvement, as the impact this time around was less severe and the recovery was faster as compared to the first wave." RevPAR stands for revenue per available room and ARR is average room rate.
Standalone RevPAR increased to ₹1,992 in Q1FY22 from ₹992 in Q1FY21, while ARR increased to ₹7,024 from ₹4,848 in the same period last year.
Even so, the recovery seen in Q1 wasn’t enough to make profits. Indian Hotels made a loss of ₹149 crore at the Ebitda level. Ebitda is earnings before interest, taxes, depreciation and amortization.
For perspective, Ebitda loss stood at ₹266 crore in Q1FY21 and the company had reported an Ebitda profit of ₹71 crore in Q4FY21.
To be sure, for now, it appears like the worst for the hotel industry is likely over.
Commenting on the Q1 performance, Puneet Chhatwal, managing director and chief executive officer, Indian Hotels, said, “July was a good month and business on the books for August looks promising."
However, it’s not like the road ahead is smooth.
“The resurgence of the second wave of covid has pushed back the revival process. Faster normalization would be key for rebound of historic 65-70% occupancies and around ₹11,000 ARR, in our view. But this may be gradual over 15-18 months," said analysts from Dolat Capital Market Pvt. Ltd in a report on 9 August.
Meanwhile, despite the challenges, investors seem to be factoring in a fair share of optimism in the company’s stock price.
After all, the Indian Hotels’ stock has outperformed the broader Nifty 500 index in the past one year.
But debt is a concern for Indian Hotels, and an equity raise is the need of the hour.
“Equity raise of around ₹1,500 crore to bring down debt to pre-pandemic level of < ₹2,000 crore and consequent dilution is inevitable," said Dolat Capital’s analysts.
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