Jhunjhunwala’s latest pick reports big loss in Q1, analysts see 17% upside

On August 6, the company reported Rs 279.92 crore loss for Q1FY21 against Rs 5.66 core profit reported for the corresponding quarter last year.

ET Bureau
Overall, the balance sheet remained strong with a net debt to equity of 0.48 times as of June 30.
The domestic hospitality industry witnessed huge losses in the washout June quarter due to the nationwide lockdown to contain Covid-19 infection. Ace investor Rakesh Jhunjhunwala’s latest pick and Tata Group firm Indian Hotels is one of them.

On August 6, the company reported Rs 279.92 crore loss for Q1FY21 against Rs 5.66 core profit reported for the corresponding quarter last year. The loss was partially offset by exceptional gains of Rs 86.10 crore and deferred tax credit of Rs 69.40 crore.

Revenue from operations declined nearly 86 per cent YoY to Rs 143.61 crore on account of lower occupancies, restrictions on operations of hotel and capped average room rate.


Overall, the balance sheet remained strong with a net debt to equity of 0.48 times as of June 30.

Industry data showed the organised Indian hospitality industry has lost revenue worth Rs 40,309 crore because of Covid-19. Also, industry revenue per available room (RevPar) for Q1FY21 has declined by 57.8 per cent YoY.

Latest shareholding data showed Jhunjhunwala reimposed his faith in Indian Hotels during the quarter. He held 1.25 crore shares, or 1.05 per cent, stake in the company as of June 30. His name was not among the key shareholders in the previous quarters.
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However, brokerages see limited upside for the stock due to the ongoing crisis. While retaining a ‘Buy’ call on Indian Hotels, Nirmal Bang Securities has cut its price target to Rs 91 (from Rs 107 earlier), indicating an upside of 17 per cent from the current market price of Rs 78.

“Owing to the pandemic, we expect revenue to decline 58 per cent in FY21. Ebitda margin for FY21 is expected to be -47.3 per cent. However, we expect a strong revival in demand in FY22. The company is making conscious efforts to reduce costs,” the brokerage said.

Edelweiss Securities recently downgraded three hospitality firms including Indian Hotels, Lemon Tree and Mahindra Holidays. Mahindra Holidays on July 31 reported a consolidated net loss of Rs 32.37 crore for June quarter against Rs 78.52 lakh profit a year ago. Lemon Tree is yet to announce June quarter numbers.

“This slowdown is much deeper and its impact would be worse than anything the sector has seen before. The recovery would now be completely different. It will take 21-24 months to reclaim the pre-Covid occupancy levels. Leverage would rise further given the high fixed-cost nature of the business,” it said, while retaining a 'hold' rating on Indian Hotels with a price target of Rs 84.
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