Hotel stocks rally; Indian Hotels at new high, Chalet, EIH gain up to 14%

Analyst believe hospitality business will be back to pre-Covid level by Q4FY22, if there won't be third wave of the pandemic

Shares of hotel companies were in focus and rallied up to 14 per cent on the BSE in intra-day trade on Monday on hopes of business revival following unlocking of the economy and pick-up in travel. The management’s commentary on strong revival from July onwards is encouraging and analyst believe business will be back to pre-Covid level by Q4FY22, if there won’t be third wave of the pandemic.

Among the individual stocks, EIH, Taj GVK Hotels & Resorts and Chalet Hotels rallied between 10 per cent and 14 per cent. Indian Hotels Company (IHCL) surged 14 per cent to hit a record high of Rs 169.20, on the BSE in intra-day trade. The stock of Tata Group company surpassed its previous high of Rs 164.10 touched on 26 June, 2019.

Analysts remain positive on IHCL’s business recovery prospects due to its strong brand recall and footprint across segments, asset light-approach, repositioning of Ginger in lean luxury segment and efficient cost management.

So far in the month of September, the stock price of IHCL has appreciated by 21 per cent, after the company announced Rs 3,000 crore fund raising plan by way of a rights issue to the existing shareholders of the company. The objective of the issue is to meet the company's financing needs for capital expenditure, growth plans and debt repayment & will be finalised in consultation with the merchant bankers, the company said.

The rating agency ICRA on 02 September reaffirmed ratings of IHCL’s non-convertible debenture programme of Rs 300 crore and revised outlook to stable from negative. The revision in the outlook on the long-term rating factors in the likely improvement in the capitalisation metrics and cash flow position of IHCL, following its recent announcement on fund raising, ICRA said in rating rationale.

The Tata Group holds 40.75 per cent stake in IHCL through Tata Sons (38.09 per cent stake) and other Group companies. Tata Sons has demonstrated its financial support to IHCL over the years, by subscribing to various equity-raising activities of the company and ICRA expects the same to continue going forward as well, should there be a need. The company also enjoys considerable financial flexibility and significant lender/investor comfort by virtue of the Tata Group lineage.