Indian Hotels nears record high ahead of fixing of QIP price band

In the past three months, the stock has outperformed the market by surging nearly 30 per cent, as compared to 0.61 per cent rise in the S&P BSE Sensex

Shares of Indian Hotels Company were up 3.3 per cent to Rs 226.45 on the BSE in Friday's intra-day trade. The surge comes ahead of the company's board meeting to decide issue price of qualified institutional placement (QIP), scheduled later today. The stock traded close to its record high level of Rs 230.14 touched on October 14, 2021.

The stock of the Tata Group company traded higher for fourth day in a row. Earlier, the stock had rallied 10 per cent after its QIP committee approved the issue on March 22, 2022 and proposed to mobilize around Rs 2,000 crore through QIP and has fixed floor price at Rs 203.48 per share.

"The meeting of QIP Committee of the Board of Directors of Indian Hotels is scheduled to be held on March 25, 2022 to consider and approve the issue price, including a discount, if any for the QIP," said Indian Hotels in a statement on March 22, 2022.

Indian Hotels intends to use the net proceeds to finance (in whole or part) repayment or prepayment of debt; working capital requirements, investment in subsidiaries, joint ventures, associates and affiliates; financing of business opportunities (which may be either organic or inorganic) and capital expenditure towards development, refurbishment and renovation of the company's assets.

In November 2021, Indian Hotels had raised Rs 1,982 crore through rights by issuing 132 million equity shares at Rs 150 per share. "The company deployed the recent equity raised through the rights issue to retire debt as per the objects of the issue, thereby strengthening Indian Hotel's objective of being a zero-debt company in the long term," said the management.

In the past three months, the stock has outperformed market by nearly 30 per cent, as compared to 0.61 per cent rise in the S&P BSE Sensex. "With its dominance in the Indian hotels sector, superlative brand equity and well-diversified portfolio across business segments and price-points, the company is well placed to capitalise on a recovery in the economy", analysts at Anand Rathi Share and Stock Brokers said.

"Like in FY22, we anticipate a strong recovery in FY23E/FY24E as well on ARR (average room rate) improvement, once the economic activities normalize, improved occupancies driven by business travel as well as leisure segment, cost rationalization efforts, an increase in food & beverages (F&B) income as banqueting/conferences resume, and higher income from management contracts," Motilal Oswal Financial Services had said in a January report. The brokerage firm maintains a 'buy' rating on the stock with a target price of Rs 258 per share.