company profile - inventure growth gvk hotels resorts...201, viraj tower, near land mark building,...

201, Viraj Tower, Near Land mark Building, Western Express Highway, Andheri (E), Mumbai-69 1

Company Profile

TAJ GVK - “ACCUMULATE” - BONUS CANDIDATE 26th

Sep,2011

Accumulate the stock within price band Rs 88-98

About Taj GVK

BSE Code 532390

CMP Rs. 89.20

Market Capitalization Rs. 559 Cr

Face Value (Rs.) 2

Price/BV 1.74x

Book Value (Rs.) Rs. 51.27 /-

52 Wk High (BSE) Rs. 175.55 (Oct 07, 2010)

52 Wk Low (BSE) Rs. 85.00 (Aug 26, 2011)

Potential Upside Rs 140

Taj GVK Hotels & Resorts (Taj GVK) is a joint venture of the Taj group and GVK group and was incorporated in

1999. Indian Hotels Company (IHCL) holds 25.52% of the JV, GVK group holds 11.29%, Caspian Capital &

Finance Ltd holds 35.47% while Bhupal family holds2.71%

IHCL is a strategic investor in the company. All major decisions including on investments are taken by the board

including the representatives from IHCL.

IHCL also manages all the properties and receives ~ 6% as management contract fees

Taj GVK currently operates five premium properties, totaling 903 rooms in cities of Hyderabad, Chennai and

Chandigarh. Hyderabad accounts for more than 50% of the total rooms and revenues.


Shareholding pattern as on 30th June, 2011

Shareholding Pattern More than 1 %

Name of the Shareholder No. of Shares Shares as % of Total No.

of Shares

Birla Sun Life Trustee Company Pvt

Ltd A/c Birla Sun Life Frontline Equity

Fund

984,000 1.57

Franklin Templeton Mutual Fund A/c

Franklin FMCG Fund

2,823,264 4.50

Kamal Kabra 711,000 1.13

Total 4,518,264 7.21

74.99%

0.19% 7.67%

17.15%

Promoters FII DII Others


Current Operational Properties……

Taj Krishna

Taj Krishna, the flagship 5-star deluxe property of TAJGVK, with a 261 room inventory, is a

magnificent structure in Banjara Hills. It immediately reflects the E-culture of Hyderabad, without forgetting

its illustrious aristocratic past. A distinguished mark of the finest quality standards, it comes as no surprise

that Taj Krishna is a member of "The Leading Hotels of the World.

Taj Deccan

Taj Deccan, with 151 rooms and set in a six acres lush green landscaping - Taj Deccan offers a variety of

options for every business requirement ranging from rooms spread across various categories to Banqueting

facilities which meet the requirements of guest for all kinds of social gatherings ranging from 20 - 2000 guests


Taj Banjara

Nestled away from the busy traffic of Banjara Hills, with its own private approach and overlooking the lake is

Taj Banjara, unique in every respect and equally popular with Tollywood & Bollywood. Taj Banjara has 122

rooms and offers the best of kebabs and biryani at the popular Kebab - e - bahar - outdoor dining by the

lake for dinner.

Hyderabad Market Overview……….

Hyderabad has traditionally been a major centre for the IT and ITeS sectors. However, with the economic

downturn in 2009 these sectors saw declines while new sectors such as finance and biotechnology have

become more active in Hyderabad. However until the downturn, Hyderabad saw significant levels of

economic development in the form of a new international airport, extensive improvements in road

infrastructure, and announcements of new industrial parks and SEZs proposed for development across the city,

especially in Gachibowli, HITEC City, and Shamshabad.The city of Hyderabad has witnessed one of the

highest growths in demand in 2010-11 in India as compared to 2009-10. The city's mid-market occupancy

levels were one of the most severely affected in 2009-10 owing partially to the ripple effects of global

recession along with the persisting Telangana issue.

The strong recovery witnessed in 2010-11 highlights the city's potential for growth and resilience. The

RPDs (Rooms Per day) in the luxury segment has been more or less stable in 2010 -11 compared 2009-

10. The city has witnessed addition of new inventory of more than 500 rooms during the year, which

were however absorbed by the addition in demand and hence not affecting the occupancies of the

existing hotels in any substantial way. Moreover, with a continued focus on economic development by

planning authorities, the high level of optimism among companies based in the city, and assuming there

is a timely resolution to the Telangana issue, Hyderabad's hotel market is expected to see improvements

in the future. The Greater Hyderabad Municipal Corporation has also initiated checks on the star hotels

in the city on various parameters ranging from cleanliness, hygiene, parking facilities, statutory

compliances to green initiatives like reduction in usage of plastic so as to spur confidence in vacationers

as well as corporates to choose Hyderabad as a favoured destination.


Taj Chandigarh

TAJGVK's is Chandigarh’s first ever branded property; the Taj Chandigarh was successfully launched a

little over 5 years ago with a room inventory of 149 rooms. Taj Chandigarh celebrates the dynamic spirit of

Chandigarh in its sophisticated architecture and interiors. The newly built hotel, located in Sector 17, the city's

prime business and shopping area Taj Chandigarh is the city's finest hotel and is well suited to both business

and leisure travelers to Chandigarh.

Chandigarh Market Overview….

The city of Chandigarh has always been a hub for film shootings with its scenic landscapes and plush gardens.

Cricket has also been a mainstay with the Mohali cricket stadium forming a permanent venue in any cricket

series that is played in the country. The Mohali cricket ground witnessed a historic event in 2010-11 in the

form of the Indo-Pak ICC Cricket World Cup semi-final which provided lot of visibility as well as business to

TAJ Chandigarh. Further, with more international flights slated to operate from the city, sanction for the

Metro project and the growth of the IT industry in and around Chandigarh, the hospitality industry is

bound to get a boost from the corporate as well as tourist activity. The occupancy levels and the average

room rates in the city did see a rise in the year 2010-11. However, the next two years are bound to see

new room inventory coming into Chandigarh with brands like Marriott, Aloft and Sheraton slated to

open up hotels.


Taj Club House Chennai

Taj Club House with 220 rooms is one more proof of TAJGVK's dedication to being recognized as a

global synonym for the warmest greeting in the hospitality industry. Taj Club House has all it takes to

make it the ideal venue for the discerning business traveler. A vibrant new-age atmosphere, a feast of dining

options, warm contemporary accommodations and impeccable levels of service, that are at once attentive and

unobtrusive

Chennai Market Overview……

Similar to most major cities, Chennai also witnessed significant rate corrections in 2010-11. However, the

city-wide occupancy increased over the last year, owing to improved performance in the second half of

2010- 11. Although the hotels witnessed a decline in demand from the IT/ITeS industry concentrated on

the OMR, the fast-developing industrial regions of Sriperumbudur, Ambattur, and Egmore helped in

sustaining occupancies. The delay in hotel openings of large hotel projects also helped in maintaining

stable occupancy levels. The diverse nature of demand in Chennai, comprising of IT/ITeS, automotive

industry, as well as other manufacturing industries located in Sriperumbudur will sustain the growth in

demand going forward. The expansion of existing manufacturing facilities and setting up of new plants

is responsible for attracting extended stay demand to the city, and is also responsible for travel by

foreign corporate guests with high paying propensity. However, a significant increase in supply of

branded hotels with sizeable inventories, especially in the upscale and luxury segments is expected over

the next few years.


Average Room Rates (ARR) are More are fairly Stable……..

Rs Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12

Taj Krishna 7,500 7,200 7,500 8,000 7,500

Taj Banjara 5,300 5,000 5,500 5,500 5,200

Deccan Hyderabad 5,300 5,000 5,500 5,500 5,200

Taj Chandigarh 7,300 7,500 8,000 7,800 7,000

Taj Chennai 5,300 5,500 5,200 5,300 5,200

Occupancy Rates (OR)……..

Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12

Taj Krishna 60 58 63 64 53

Taj Banjara 66 71 73 79 52

Deccan Hyderabad 67 72 69 74 63

Taj Chandigarh 74 65 77 74 75

Taj Chennai 50 57 65 75 63

ARR &OR were slightly subdued in Q1FY12 due to off season scenario as well as due to political disruption in the

Hyderabad region where the company has 3 properties and a room inventory of 534 rooms.


Upcoming Properties & Expansion Initiatives….

Taj Vivanta

The civil works and interiors for the new five star hotel project site at Begumpet, Hyderabad is in

advanced stages and is nearing completion. As per asset light strategy of the Company, the owner of

land has put up the structure and the Company is doing the interiors. The project would consist of ~189

rooms with cost of interiors estimated at around ~ Rs 100 -106 Cr and is expected to be operational

in Sep 2011.

Spa & Additional Car Parking

The Company is proposing the construction of a 12000 sq ft spa and an additional Car parking

facility along-with enhanced landscaping and connecting bridges at the existing premises of Taj

Krishna, at an cost ~ Rs 20-25 Cr. The excavation works have been completed and the construction

work on the car-parking facility has commenced and the completion of this project is expected to be

operational in Q4FY12.

Ginger Hotel

The company is also planning to enter the value for money segment through the 'Ginger' brand in Andhra

Pradesh. The excavation works on the first Ginger hotel on a site located near the Hyderabad International

Airport have been completed. The hotel is to be constructed on ~ 1 Acre of land near with an

inventory of ~ 250 Rooms which is expected to be operational in FY13. The total investment outlay

is ~ Rs 40-45 Cr the company has already spent ` Rs 20 -25 Cr for the same till date.

Capitalizing on Land Bank in Bangalore

The company is also in the initial phases for exploring opportunities in the IT hub of Bangalore to

capitalize on its six-acre land bank in Bangalore.

Total No of Rooms Inventory ……

Hotels Location Status Existing Post Expansion

Taj Krishna Hyderabad Operational 261 261

Taj Banjara Hyderabad Operational 122 122

Taj Deccan Hyderabad Operational 151 151

Taj Chandigarh Chandigarh Operational 149 149

Taj ClubHouse Chennai Operational 220 220

Taj Vivanta Begumpet,Hyderabad Will Be Operational Soon N.A. 189

Total No of Rooms 903 1092


Tourism & Hospitality Industry Overview…..

One of the biggest challenges that India has faced on it path to economic development is the poor state of its

infrastructure. The Union Budget 2011-2012 has stressed the requirement for improved infrastructure and

has proposed several measures that will increase the investment in this sector and accelerate growth. With

an improved network of highways, railways and airports visitors and tourists will be able to explore the

country and visit places that might have been inaccessible or left out, thus providing impetus to the

hospitality industry too.

The growth in the services sector which accounts ~57 % of GDP is expected to move from 9.6 % in 2010-11 to 9.9 % in 2011-2012 due to growth in hotels, transport, communications and finance

Further in 2011-12 the room demand is expected to increase by 11-12 % where as supply is expected to increase by only 10 %.The Occupancy Rate (OR) is expected to cross 65 % while ARR (Average

Room Rate) is expected to grow 5%. Consequently hotel revenues are expected to grow 15-17 %.

Source: CRISIL

Tourism in India is the largest service industry, with a contribution of 6.23% to the national GDP and 8.78% of the total employment in India. Indian Tourism and Hospitality sector has reached new

heights and travelers are taking new interest in the country, which leads to grading the hospitality

sector.

Even an increase in business travel has driven the hospitality sector to serve their guests better. Visiting foreigners has reached a record 3.92 million and consequently International Tourism

receipts have also risen to US $ 5.7 billion.

Source: Company, Inventure Research

The World Travel and Tourism Council (WTTC) has named India along with China as one of the fastest growing tourism industries for the next 10 to 15 years.

The Indian hospitality sector is expected to show a healthy growth and according to the Ministry of Tourism, the contribution of tourism to India's GDP is 5.9 % as compared to worldwide average of

11%

Source: WWTC, Ministry of Tourism


By 2020 the tourism industry in India is expected to increase to US$ 275.5 billion at a 9.4% annual growth rate and also expects travel and tourism to contribute Rs 8500 billion GDP, almost 4 times

the value in 2005.

Hospitality industry closely linked with travel and tourism industry and India is experiencing huge footfalls as a favorite vacation destination of foreigners and natives and the hospitality industry is

going into a tizzy working towards improving itself. The Indian tourism industry has outperformed

the global tourism industry in terms of growth in the volume of international tourists as well as in

terms of revenue.

Source: Annual Report 2011

Union Budget 2011-2012: Benefits for Hotel Sector…..

Under the existing provisions of section 35AD of the Income Tax Act, Investment Linked Tax Incentive is provided by way of allowing 100% deduction in respect of any expenditure of capital nature (other than on

land, goodwill and financial instrument) incurred wholly and exclusively, for the purposes of the Specified

business. The specified business includes building and operating, anywhere in India, a new hotel of two

star and above category, as classified by the Central Government under section 35AD (8) (c). This

amendment will come into effect from 1st April, 2012 and will accordingly, apply in relation to the

assessment year 2012-13 and subsequent years.

Under Section 73A, any loss of a specified business (under section 35AD) is allowed set-off against profit and gains of any other specified business. In order to remove any ambiguity in this regard in respect of the

business of hotels, the Union Budget proposed to remove the word new from the definition of specified

business in the case of hotels under section 35AD(8) (c ). With this, the loss of an assessee on account of a

specified business claiming deduction under section 35AD would be allowed to be set off against the profit

of another specified business under section 73A, whether or not the latter is eligible for deduction under

section 35AD. It means an assessee who currently operates a hotel would be able to set off the profits of

such business against the losses, if any, of a new hotel which starts to operate after 1st April, 2010 and is

eligible for deduction of expenditure under section 35AD. This amendment will come into effect

retrospectively from 1st April, 2011 and will, accordingly, apply in relation to the assessment year 2011-12

and subsequent years


Investment Rationale…..

Key Presence & Market Leader in the Hyderabad Market: TajGVK is the market leader in the Hyderabad market, where it has a share of ~ 30% in premium-segment. We believe that

TajGVK would continue to enjoy its presence in the key markets of the company.

Room Capacity Addition: Taj GVK is expected to benefit from the addition of its 189-room new property in Begumpet, Hyderabad which expected to be operational in next 10-15 days which

will take its owned rooms to 1,092 from 903 currently. Taj Vivanta is expected strengthen its

foothold presence further & tap mid-market room demand in the city of Hyderabad.

Asset Light Business Model: As per asset light strategy of the company, the owner of land has

put up the structure and the company is doing the interiors. The project would consist of around

189 rooms with cost of interiors at around Rs.106 crores, and is expected soon. This would

require a lower capital outlay as compared to a Greenfield expansion. Further the company has a

very comfortable debt/equity ratio of 0.44x as of 2011 and is expected to further improve to 0.25x

in FY13 this enables TajGVK with adequate opportunity to plan further expansions, without

impeding the quality of the balance sheet.

De-risking of Business Model: TAJ GVK had ~80 % room inventory from Hyderabad market. However the company undertook expansion in key cities like Chennai & Chandigarh for de-

risking the business model. This has lead to diversifying its presence in other key markets. In

FY11 ~59% room revenues were in Hyderabad as compared to ~80% inFY08.

Festival Season to Boost Demand: Oct 2011 Onwards till May 2012 is a season time The

company enjoys a higher occupancy rates as well as higher Average Room Revenue during this

period so Q3 &Q4 are healthy quarters for the entire industry and co is expected to perform well

Strong Brand Recall & Management Experience: Taj GVK has a strong brand recall and

enjoys strong management experience being the part of Indian Hotels Company Ltd group of

hotels. Taj GVK has a healthy capital structure which is capable of supporting higher levels of

borrowing. The company has D/E 0.44x which enables the management for levering up if

required for future capex.


Depreciating Rupee to Attract More Foreign Tourists: The depreciating Indian Rupee of late

has made the travel to India even more cheap since the depreciation of INR against all major

currencies will provide the benefits for value for money for both leisure as well as business

travelers even more and with the season time on the verge of onset from Oct 2011 to Mar 2012

the ARR & OR is expected to further improve as increasing foreign tourist arrivals (FTA).

The above graph shows steep depreciation in Indian Rupee against the US dollar.

Healthy Financial Position & Likely Bonus Candidate: TAKGVK has reserves of Rs 309 Cr

as of FY11 and the comfortable debt position of 141 Cr. The company has the habit of

rewarding shareholders with a 100% dividend on the FV of Rs 2/-.We expect the company can

reward shareholders with a bonus 2:1 i.e. 2 equity shares for every 1 existing share Since Co

has equity capital of just 12.54 Cr. The company has an ROE 13.48% & ROCE of 16.65%

which is one of the best in the hotel industry. Further operationally it is one of the best managed

chains in the hotel industry.

Taj Krishna Strategic expansion: The expansion of the car parking facility at Taj Krishna will

enable to attract higher meetings, conferences & exhibitions and banqueting business is expected

to help the company in the long term. The construction of a 12000 sq ft spa and an additional

Car parking is expected to commence operations in Q4FY12.

Other Plans: The Company is also in the initial phases for exploring opportunities in the IT hub

of Bangalore to capitalize on its six-acre land bank in Bangalore. The Company is also planning

to enter the value for money segment through the ‘Ginger’ brand in Andhra Pradesh. The

excavation works on the first Ginger hotel on a site located near the Hyderabad International

Airport have been completed.


Risks & Concerns…….

The hotel sector may be unfavorably affected by changes in global and domestic economies, changes in

local market conditions, excess room supply, reduced international or local demand for hotel rooms

and associates services, competition in the industry, government policies and regulations,

fluctuations in interest rates and foreign exchange rates and other natural and social factors.

Since demand for hotels is affected by world economic growth, a global recession could lead to a

downturn in the hotel industry and could affect the company’s prospects

Any adverse events such as political instability, conflict between nations, terrorist attacks or spread of

any epidemic or security threats to any countries may affect the level of travel and business activity.


259.06 238.21 229.25

260.66 296

357

0

50

100

150

200

250

300

350

400

FY 08 FY 09 FY 10 FY 11 FY 12E FY13E

Turnover(Rs in Cr)

331.39

443.37 459.77 488.60

535.47 519.75

0

100

200

300

400

500

600

FY 08 FY 09 FY 10 FY 11 FY 12E FY 13E

Net Fixed Assets (Rs in Cr)

11.23

8.42

5.78 6.91

8.27

10.67

0

2

4

6

8

10

12

FY 08 FY 09 FY 10 FY 11 FY 12E FY 13E

EPS (Rs.)

108.29

81.69

54.96 65.73

78.8

101.68

0

20

40

60

80

100

120

FY 08 FY 09 FY 10 FY 11 FY 12E FY 13E

PBT (Rs in Cr)

231.12 269.36

291.17 320.10

357.15

405.72

0

50

100

150

200

250

300

350

400

450

FY 08 FY 09 FY 10 FY 11 FY 12E FY 13E

Networth (Rs in Cr)

160%

100% 100% 100% 110%

125%

0%

50%

100%

150%

200%

FY 08 FY 09 FY 10 FY 11 FY 12E FY 13E

Dividend %


138.99 125.33

141.14

160.35

106.58

0

20

40

60

80

100

120

140

160

180

FY 09 FY 10 FY 11 FY 12E FY 13E

Borrowing (Rs in Cr)

0.52

0.43 0.42 0.45

0.26

0

0.1

0.2

0.3

0.4

0.5

0.6

FY 09 FY 10 FY 11 FY 12E FY 13E

Debt/Equity Ratio

43.22 46.68

51.27 56.96

64.71

0

10

20

30

40

50

60

70

FY 09 FY 10 FY 11 FY 12E FY 13E

Book Value (Rs.)

32.68% 35.10%

40.64% 41.81% 37.70% 32.41%

39.73% 40.06% 34.87%

10.26% 13.09%

19.00% 19.36%

16.67% 12.48%

18.43% 18.66% 20.42%

0.00% 5.00%

10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00%

Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY10 Q1 FY11 Q2 FY11 Q3 FY11 Q4 FY11 Q1 FY12

EBIDTA Margin (%) PAT Margin (%)

52.76

36.26 43.34

51.85

66.91

0

10

20

30

40

50

60

70

80

FY 09 FY 10 FY 11 FY 12E FY 13E

PAT (Rs in Cr)


Q1FY12 Result Analysis………

Particulars (Rs. Cr) Q1 FY12 Q1 FY11 YoY (%) Q4 FY11 QoQ (%)

Net Sales 58.85 60.59 -2.87% 69.07 -14.80%

Other Operating Income 0.07 0.40 -82.50% 0.61 -88.52%

Total Income 58.92 60.99 -3.39% 69.68 -15.44%

Expenditure

a) Consumption of raw materials 5.61 5.86 -4.27% 6.42 -12.62%

b) Employee cost 11.87 11.24 5.60% 11.50 3.22%

c) Fuel, Power, Light 5.33 5.23 1.91% 5.18 2.90%

d) Other expenditure 15.60 15.81 -1.33% 18.91 -17.50%

Total 38.41 38.14 0.71% 42.01 -8.57%

EBIDTA 20.51 22.85 -10.24% 27.67 -25.88%

Depreciation 5.02 5.05 -0.59% 5.27 -4.74%

Interest 2.91 2.64 10.23% 2.68 8.58%

Other Income 0.00 0.00 0.00

PBT 12.58 15.16 -17.02% 19.72 -36.21%

Tax 0.56 5.05 -88.91% 6.83 -91.80%

PAT 12.02 10.11 18.89% 12.89 -6.75%

Equity share capital (FV-Rs.2) 12.54 12.54 - 12.54 -

EPS (Rs.) 1.92 1.61 - 2.06 -

EBIDTA Margin (%) 34.85% 37.71% - 40.06% -

PAT Margin (%) 20.42% 16.69% - 18.66% -

During Q1FY12, top line remained under pressure on a lower pick-up in demand and political disruptions

in the Hyderabad region. Bottom-line surged by 19% YoY on account of tax deduction on capital

expenditure incurred on Taj-Begumpet

EBITDA margins declined on account of lower than expected growth in sales

Profit after Tax was at Rs 12.02 crores in Q1 2011-12 as compared to Rs.10.11 crores in the

corresponding period last year, thus registering a growth of ~19%.

The Company with its prime properties in key metros is well positioned to benefit from the growing

demand and restricted supply going forward.


Financials - Income Statement – (Rs. in Cr except EPS) ……

Particulars (Rs. Cr) FY10 FY11 FY12E FY13 E

Net Sales 228.25 259.28 295.00 356.00

Other Operating Income 0.99 1.38 1.00 1.00

Total Income 229.24 260.66 296.00 357.00

Expenditure

a) Consumption of raw materials 21.21 25.23 28.20 37.46

b) Employee cost 40.98 46.77 52.60 61.10

c) Fuel, Power, Light 18.60 20.95 22.65 28.64

d) Other expenditure 61.72 70.07 76.70 86.48

Total 142.51 163.02 180.15 213.68

EBIDTA 86.73 97.64 115.85 143.32

EBIDTA Margin (%) 38.00% 37.66% 39.27% 40.26%

Depreciation 19.61 20.61 22.65 25.72

Interest 12.17 11.30 14.40 15.92

Other Income 0.00 0.00 0.00 0.00

PBT 54.95 65.73 78.80 101.68

Tax 18.69 22.39 26.95 34.77

PAT 36.26 43.34 51.85 66.91

PAT Margin (%) 15.89% 16.72% 17.58% 18.79%

Equity share capital (FV-Rs.2) 12.54 12.54 12.54 12.54

EPS (Rs.) 5.78 6.91 8.27 10.67


Consolidated Balance Sheet – (Rs. in Cr)……

Particulars (Rs. Cr) FY10 FY11 FY12E FY13E

Sources of Funds

Equity Share Capital 12.54 12.54 12.54 12.54

Reserves & Surplus 280.13 308.90 344.61 393.18

Loan Funds 125.33 141.14 160.35 106.58

Long Term Trade Deposists 0.87 1.96 2.70 3.50

Deferred Tax Liability (Net) 16.08 19.26 19.50 19.50

Total 434.95 483.80 539.70 535.30

Application of Funds

Fixed Assets 459.77 488.60 535.47 519.75

Investments 0.02 0.02 0.02 0.02

Current Assets, Loans & Advances 35.82 45.80 53.86 67.88

Less: Current Liabilities & Provisions 62.16 51.96 50.65 53.35

Misc Expenditure 1.50 1.34 1.00 1.00

Total 434.95 483.80 539.70 535.30


Ratio Analysis…….

Particulars FY10 FY11 FY12E FY13E

EPS (Rs.) 5.78 6.91 8.27 10.67

P/E (x) 15.42 12.90 10.79 8.36

BVPS (Rs.) 46.68 51.27 56.96 64.71

Dividend per Share(Rs.) 2.00 2.00 2.20 2.50

Dividend Payout (%) 34.58% 28.93% 26.60% 23.43%

Dividend yield (%) 2.24% 2.24% 2.47% 2.80%

ROE (%) 12.39% 13.48% 14.52% 16.49%

ROCE (%) 16.06% 16.65% 18.01% 22.96%

Interest Coverage (x) 5.52 6.82 6.47 7.39

Debt/Equity (x) 0.43 0.44 0.45 0.26

Current Ratio (x) 0.79 1.27 1.71 2.21

Asset Turnover (x) 0.52 0.54 0.55 0.67

Market Cap/Sales (x) 2.45 2.16 1.89 1.57

EV/Sales (x) 2.99 2.68 2.42 1.84

EV/EBIDTA (x) 7.86 7.12 6.16 4.56

Peer Comparison…….

Particulars (26th

Sep,2011)

Taj GVK

Hotels

Hotel

Leela

Mahindra

Holiday

Oriental

Hotels

EIH Assoc.

Hotels

Mkt Cap (Rs. Cr) 559.00 1376.00 2599.00 482.00 309.00

P/E (TTM) (x) 12.35 38.17 24.44 20.61 25.80

P/BV (TTM) (x) 1.74 1.55 5.16 1.65 2.72

EBIDTA Margin (%) 37.66 29.49 32.28 26.30 29.84

PAT Margin (%) 16.72 7.19 20.05 10.56 5.15

Mkt Cap/Sales (x) 2.16 2.62 5.20 1.73 1.69

EV/EBIDTA (x) 7.12 28.78 22.52 11.99 9.47

ROE (%) 13.48 4.40 21.80 7.70 11.00

ROCE (%) 16.65 2.70 3.89 9.30 12.20

D/E (x) 0.44 3.89 1.88 0.70 2.24

Taj Gvk is one of the better managed hotels as compared to its peers on various parameters


Technical View……

In the last 5 months, the stock has been trading in the range of Rs.85 -110. We feel the stock has good support at

lower end of the trend channel i.e. around Rs.85-90 . The 200 day SMA is at Rs.107. We expect the stock to

break its near term high of Rs.110 & trade in the range of Rs.120 -150. Once the stock crosses its upper end

of the trend channel i.e. around Rs.150, it has the potential of scaling new higher levels. We recommend

accumulation between Rs 88-98 levels


Valuations……..

At current market price of Rs 89.20 /- the stock is trading at 10.79x FY12E earning & 8.36x of

FY13Eearnings. We expect EPS of Rs 8.27 in FY12E & Rs 10.67 in FY13E.

The new hotel i.e. Taj Vivanta Begumpet is expected to be operational anytime soon. Further

Expansion of car parking at Taj Krishna and Ginger, Hyderabad is on track in terms of time as

well as capex involved. The commencement of car parking facility at Taj Krishna Hyderabad will

provide the necessary booster to the food & beverage revenues going forward

The Company also has consistent track record of paying dividend & outlook of the company and

industry is intact. Further the company is a likely bonus candidate

The Company with its prime properties in key metros is well positioned to benefit from the

growing demand and restricted supply going forward

The company has an ROE 13.48% & ROCE of 16.65% which is one of the best in the hotel

industry. Further operationally it is one of the best managed chains in the hotel industry.

Accumulate Within price band of Rs 88- 98

We Recommend “Buy” with a Potential Upside of Rs 135 - 140/- within 12 months of time

horizon.


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