IHC may buy more properties

Mumbai: Indian Hotels Company (IHC), which owns India’s best hotel properties including the Taj Mahal Hotel in Mumbai, plans to raise funds for acquiring properties in the future. This is the right time to acquire properties, as they would come relatively cheap due to the ongoing slowdown, analysts feel.

It is not clear as to what is going to be the quantum of investment, but IHC has armed itself with an enabling resolution passed in the last annual general meeting, empowering it to borrow up to Rs 1,500 crore from the existing limit of Rs 750 crore, and to raise its paid-up capital to Rs 200 crore from the current level of Rs 50 crore.

IHC had also armed itself with a resolution that allows it to raise $75 million through equity, either in the domestic or in the international market. In the AGM, the company had not clarified what type of shares it planned to issue; it had merely said the paid-up capital limit was increased to enable it to issue unclassified shares in one or more tranches.

Sources said IHC has also moved to ascertain its enterprise value by getting its various properties revalued at the market price. A revaluation exercise was last undertaken in 1995-96. The company also plans to get its ‘Taj’ brand valued. Apart from Mumbai’s Taj Mahal Hotel, the Taj name is also associated with some other properties of the Taj Group of Hotels - the Taj Coromandel, Chennai; the Taj Malabar, Kochi; the Taj Residency, Vizagapatnam.

The sources maintained that the valuation exercise is to clearly ascertain the company’s market capitalisation, as the stock markets are under-discounting its shares. While business and leisure traveling has certainly taken a beating post-11 September, the company has had a fine track-record and has been enjoying a high market share in the hospitality segment. Therefore, they analyse, the present slide in the share price is only temporary and not truly indicative of the capitalisation of its business.

Though revenues and profits are expected to take a plunge in the second quarter, things are likely to improve in the next quarter, as leisure traveling is expected to gather momentum. IHC has also embarked upon cost-cutting measures to prop-up its bottomline and has introduced several promotional offers to lure customers into using its properties.