This smallcap hotel stock has zoomed 29% in 2 days; hits new high

Shares of Taj GVK Hotels & Resorts hit a new high of Rs 497.60, as they rallied 7 per cent on the BSE in Thursday’s intra-day trade, extending its Wednesday’s up move amid heavy volumes. In the past two trading days, the stock has zoomed 29 per cent.  Thus far in the month of February, it has surged 41 per cent.

 

At 09:46 am, Taj GVK Hotel shares were trading 3 per cent higher at Rs 477, as compared to the 0.34 per cent decline in the BSE Sensex. The average trading volumes on the counter jumped 1.5 times, with a combined 2.2 million equity shares changing hands on the NSE and BSE.

 

TajGVK is a joint venture (JV) between GVK Group and The Indian Hotels Company Limited (IHCL). GVK Group holds about 49.47 per cent stake in the JV and IHCL holds around 25.52 per cent stake in TajGVK (as on December 31, 2024). The balance is held by the public. 

 

The company has a strong presence in the Hyderabad market and its properties are well established, with existence for several years. TajGVK’s flagship 5-star deluxe property—Taj Krishna—is a well-established property in the Hyderabad Central Business district (CBD), commanding a revenue per available room (RevPAR) premium compared to other properties in the vicinity. 

 

Apart from the three properties in Hyderabad, TajGVK has two other properties, one each in Chennai and Chandigarh, which are also well established in their respective cities. The company’s property in Mumbai under a JV, Greenwoods Palaces & Resorts Private Limited—TajSantacruz—has location-specific advantage (by virtue of its proximity to the Mumbai international airport).

 

For the October to December 2024 (Q3FY25) period, the company reported a 40 per cent year-on-year (YoY) jump in consolidated profit after tax at Rs 33.89 crore, against Rs 24.21 crore in Q3FY24. Revenue from operations grew 14 per cent YoY to Rs 126.94 crore, from Rs 111.13 crore.

 

Going ahead, apart from company specific factors, tailwinds such as a recovery in Indian hospitality, lower penetration of hotels compared to other countries, demand outpacing supply and government support for tourism and infra will aid the hotel business to deliver strong performance in the coming years, according to analysts.

 

Higher demand from domestic leisure travellers, recovery in foreign tourist arrivals (FTAs) and a revival in corporate travels will keep room demand high for hotel companies (and also help achieve higher room rentals) in the short-to-medium term. Recent industry data shows that demand is expected to continue to grow in double digits (~12 per cent), according to Mirae Asset Sharekhan.

 

However, the supply is expected to grow by ~9 per cent over the next 4-5 years. This augurs well for the industry because hotel performance in India is highly sensitive to supply and demand dynamics. Margins of hotel companies are likely to expand, aided by better operating leverage coupled with various cost-saving initiatives undertaken by companies, the brokerage firm said.