Which Tata Group stock performed the best in 2023? The answer may surprise you

Fund managers are now recognizing the resurgence of blue-chip stocks, which had previously underperformed compared to their broader market counterparts.

Among large-cap stocks, Tata Group's shares are noteworthy. For instance, Trent's share price has surged by 122% in 2023, Tata Elxsi has gained 42%, Titan has increased by 40%, and both TCS and Tata Steel are up by about 15%.

However, out of the 29 listed Tata Group stocks, which one has been the top performer in 2023 in terms of returns? It's not the recently listed Tata Technologies, Tata Motors, or even Trent.

Here's a clue: This stock was trading around ₹3,000 in January 2023 and has soared to ₹8,740. Yes, it has more than doubled investors' wealth in just a year.

So, which company are we talking about?

The surprising achiever is Benares Hotels, a subsidiary of Indian Hotels.

About Benares Hotels

Benares Hotels, less known compared to the Taj Hotels chain, became a subsidiary of Indian Hotels Company (IHC) in 2011. Two of its hotels, Taj Ganges and Taj Nadesar Palace in Varanasi, operate under the Taj brand, while The Gateway Hotel in Maharashtra has been rebranded to Ginger Hotel. As of 2022, Benares Hotels primarily earned revenue from room, food, and banquet services.

Recently, the company expanded, adding new rooms across its properties. Taj Ganges and Nadesar Palace now offer 144 rooms and suites, while Ginger Hotel has 34 rooms.

The factors behind Benares Hotel's share price rally in 2023 include:

#1 Strong financials

Benares Hotels, leveraging the Taj IHC's brand, has seen exceptional financial growth, evident in its revenue per available room (RevPAR). 

As Taj Ganges and Taj Nadesar Palace are a part of Taj hotel portfolio, they enjoy high occupancy rates which benefit Benares Hotel.

In the September 2023 quarter, the hotel's net sales jumped by 46.2% to ₹259 million, and net profit soared by 130.4% to ₹68 million. Earnings before interest, tax, depreciation and amortisation (Ebitda) surged to ₹160 million, a 187% surge from ₹56 million a year ago.

Now, if you see, the business has seen a steep turnaround in its financials from 2021 to 2023.

The company's revenue has nearly doubled from ₹500 million in 2021-22 to ₹950 million in 2022-23, with Ebitda more than doubling as well.

In fact, after the pandemic, the business has been consistently reporting positive quarters which was not the case in 2021 and this is why there is increased investor optimism for the stock.

The chairman of Benares Hotels believes that the growth was due to a sharp revival in the Indian hospitality industry in 2023.

#2 Uptick in travel tourism

The end-of-year holiday season often boosts demand for luxury hotels. And, it’s no different for the Taj portfolio of hotels, which will be in high demand during this period which will boost the profitability of its hotel businesses. 

This expected surge in the hospitality sector during the holiday season is reflected in the rising stock prices of hotel companies.

#3 Wedding season boom

With the onset of winter comes the much-celebrated wedding season. Every year a staggering 10 million marriages take place during this period.

You would be surprised to know that the marriage industry is India's fourth-largest industry, surpassing even cars, steel, and technology.

This glory of big fat weddings brings back to back booking of banquets across hotels, particularly 5-star hotels, which can boost revenues for the hotel.

With this expectation, the stock price of Benares Hotels is rallying.

What’s Next?

In line with the consistent increase in demand and high occupancies, Benares Hotels has been focusing on growth.

In its annual report, the management said that Taj Ganges will add a 100-room tower with larger rooms, pushing the total inventory to 230 rooms.

Moreover, industry experts believe that the average revenue per available room at the sector level is likely to grow by 15-20% in the second half of the financial year.

In Conclusion

From the long list of Tata Group stocks, Benares Hotel stood out as a standout performer in 2023, demonstrating the market's appreciation for companies showing positive growth.

However, investors must also be cautious as the hospitality industry is sensitive to economic fluctuations and unforeseen events.

For more, here is a compiled list of Tata Group stocks you can refer to. This will help you understand more about the company’s financials.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com