Foreign Exchange Earnings Lend The Prop For East India Hotels

EIH Ltd (formerly East India Hotels Ltd), a leading Indian hotel chain with 30 hotels worldwide, has raised its bottomline by 14.9 per cent during 1996-97 on a 11.3 per cent higher sales. While operating profit increased by 4.9 per cent over the previous fiscal, the sharp increase in depreciation (up 16.4 per cent) was more than offset by a 22.6 per cent fall in interest charges. Further, while the company's foreign exchange outgo was lower by 9.5 per cent during the year under review, forex earnings increased by 13.7 per cent.

EIH's chain of luxury hotels includes 13 properties in India and properties in Indonesia, Saudi Arabia, Egypt and Sri Lanka. Better known as the Oberoi chain of hotels, EIH Ltd was incorporated in 1949 and promoted by M.S.Oberoi and Oberoi Hotels (India) Pvt. Ltd.

 

Besides owning 10 hotels in India, EIH also manages three hotels on contract basis, the Trident Madras, Novotel, Agra and Krishna Oberoi, Hyderabad.EIH has 2200 rooms under Trident of which 1690 rooms are owned by the company. Targetted at the business traveller, 75% of its revenues accrue out of 912 rooms located in New Delhi and Mumbai. Business travellers constitute 85 % of its guests. Occupancy rate of rooms is around 65 % with its Mumbai property accounting for the highest average room rate (ARR).

Following an increase in equity capital, the company's earnings per share fell from Rs. 35.55 in 1995-96 to Rs. 26.36 in 1996-97. The company issued and allotted 11,25,114 equity shares of Rs. 10 each at a premium of Rs. 65 per share to the holders of detachable warrants of the 16 % non-convertible debentures issued in 1993. These shares were allotted on 6th November, 1996. The company also issued and allotted 1,74,64,299 equity shares of Rs.10 each as fully paid bonus shares in the ratio of 1:2. The paid-up equity capital of the company has therefore increased to Rs. 52.39 crore as on 31 March, 1997. Encouraged by its performance, the company increased the dividend to 50 per cent last year against 45 per cent in 1995-96.

The debt-equity ratio of the company declined from 14.5 per cent in 1995-96 to 9.9 per cent in 1996-97.

The company had raised $40 million through a GDR issue in October 1994 for renovation of its properties in Shimla and Darjeeling and setting up hotels in Chennai, Agra, Jaipur and Ahmedabad. EIH has also taken shareholders approval for raising $100 million through another GDR issue at its annual general meeting in June 1996 for further expansions.

The company plans to continue its ambitious growth and expansion plans through direct ownership, joint ventures and management contracts. The Cecil, Shimla and the Oberoi Lombok, Indonesia commenced operations recently. The Oberoi group has recently decided to invest Rs. 1150 crore over the next four years in adding leisure destination properties and budget hotels to its portfolio.

EIH plans to contribute Rs. 500 crore as equity investment in different projects being promoted by the group. For EIH, this will mean an outgo of at least 60 per cent of its net cash accruals over the four-year period.

The investment of Rs. 500 crore will be in addition to EIH's own expansion plans pegged at around Rs 350 crore. The company is also undertaking capacity expansion at the Oberoi, Bangalore and the Oberoi Grand, Calcutta by adding a total of 75 rooms. A major facelift is also on the cards for the Oberoi Towers, Mumbai.

The company's share price quotes at around Rs. 411 on the Calcutta Stock exchange, discounting its 1996-97 earnings per share by 15.6 times.