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EIH: A five-star performance

Anup Menon

EIH Ltd is one of the few stars in the hotel industry and its performance for 2000-2001 only goes to justify its position. It should be noted that, in recent times, it has been one of the few hotels which have been performing reasonably well on a consist ent basis.

Despite sluggish trends in occupancy rates and the resultant pressure on room rates, the company has managed to post a net profit of around Rs 94.82 crore, Rs 22.35 crore higher than the previous year.

On a year-on-year basis, net income from operations has improved by around 13 per cent to Rs 477.06 crore as against Rs 421.09 crore in the previous year. The improvement in total income is credible. With problems mounting for the industry, the focus has been to keep the rooms occupied.

However, occupancy rates have not been edging up in recent times. Given the state of the market, hoteliers have to keep their room rates under check and offer massive discounts to attract customers. This is clearly reflected in the operating margins of t he company.

If one were not to include the other income component, the company's operating margin has improved marginally from around 30 per cent to around 32 per cent. The impact of other income on operating margins is not significant. In absolute terms, the other income component has come down by around Rs 3 crore only.

Though there has been a 13 per cent growth in sales, operating margins have not moved up significantly. This could be on account of the lower yield that hoteliers are managing to attain. However, EIH, among the most efficient hotel chains in the country, has managed to hold its ground through good management of its resources, thereby keeping costs under check.

The company has posted a growth of 31 per cent growth in net profit at Rs 94.82 crore as compared to Rs 72.47 crore in the previous year. This again has largely been on account of prudent management of finances and keeping a check on the interest cost.

On an equity base of Rs 52.39 crore, the earnings per share of the company for 2000-2001 works out to around Rs 16 per share. This represents a 23 per cent growth over its previous year's EPS. The board has also recommended a dividend at Rs 6 per share o n a face value of Rs 10.

Looking ahead, the company should perform better in this fiscal. Its marketshare in the premium segment is not likely to come under pressure in the near future. Given the rising demand for budget hotels, brands which are well established such as EIH's `` Oberoi'' and also own hotels in this segment are likely to do well.