Indian Hotels' stock has increased by 109% over its December 2021 rights issue price

8 Sep 2022 , 10:31 AM

Indian Hotels Company (IHCL) shares increased by about 3% on the BSE in Wednesday’s quiet market, reaching a record high of Rs313.70. The company’s stronger business prospects brought on the increase.

As opposed to the S&P BSE Sensex’s 0.87 % during the previous week, the stock of the Tata Group company has increased by 10%. IHCL has outpaced the market over the last three months, rising 35% vs a 7% increase in the Sensex. Additionally, it has increased by 65% over the past six months compared to the benchmark index’s rise of 12%.

Since the stock’s rights issue price of Rs150 per share, it has more than doubled (up 109%). IHCL raised Rs1,982 crore through a rights sale of 132 million equity shares in November 2021.

Since the qualified institutional placement (QIP) price of Rs202 per share, the stock has increased by 55%. The business issued 99 million equity shares to qualified institutional purchasers in March 2022 to raise Rs2,000 crore. IHCL has raised close to Rs4,000 crores through a rights offering and a QIP with the intention of strengthening its balance sheet, becoming net cash positive in the process.

In its FY22 annual report, the firm said that it will continue to sell non-core and non-productive assets to free up funds to support targeted activities that foster the development of long-term value. The business promised to “use our strong connections within the Tata group and with important partners like GIC” to ensure that capital expenditure was optimized without sacrificing development prospects.

IHCL also reported its highest Q1 operating profit margin in the previous ten years at 29.8% in the April—June quarter (Q1FY2023), helped by the continuation of cost-cutting measures implemented in the previous two years as well as advantages resulting from a recovery in demand and resulting operating leverage.

On a full-year basis, the sales and operating profits in FY23 are likewise anticipated to experience strong improvement. The expansion of IHCL’s hotel portfolio and a robust uptick in demand is anticipated to support revenue growth over the medium term. In addition, the growth is probably going to be asset-light because the bulk of the additional properties would be acquired under management contracts, according to a justification from rating agency ICRA dated September 1, 2022.

Through Tata Sons (35.74 percent interest) and other Group entities, the Tata Group owns 38.19 percent of IHCL. Tata Sons have shown its financial support for IHCL over the years by investing in a number of the company’s equity-raising initiatives, and ICRA anticipates that this assistance will continue in the future as well, should it be necessary.

Due to its ties to the Tata Group, the firm also benefits from strong financial flexibility and lender/investor comfort, according to the rating agency.

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