Why did Madhusudan Kela Exit this hotel Stock?

India has seen some remarkable success in producing renowned and respected stock market investors who not only accumulated immense wealth but also gained global recognition from financial communities worldwide.

These brilliant minds have a keen eye for recognizing trends within the markets, an exceptional understanding of our nation's economy, as well as possessing intuition to make strategic investments that pay off exceptionally.

Therefore, many investors turn to studying the strategies of these investment maestros, hoping to glean insights that can propel their portfolios to new heights.

For investors seeking such news, there is noteworthy stock market news: Madhusudan Kela has recently trimmed his stake in this hotel stock.

Who is Madhusudan Kela?

Known for his ability to identify quality companies with strong growth prospects, Madhusudan Kela is one of the most well-known and seasoned investors in the Indian stock market, with extensive experience of over 27 years.

He prefers a value investing style and has a long-term investment horizon.

Which Stock did Madhusudan Kela Sell and Why?

The hotel company in question is Samhi Hotels.

Samhi Hotels is an Indian hospitality company specialising in the development, acquisition, and management of hotels across various segments.

The latest shareholding of Samhi Hotels shows that Madhusudan Kela's name was missing from the list of shareholders for the June 2024 quarter.

This means his holding might have slipped below 1%, or he could have sold the entire stake in the quarter gone by.

Before this, in the March 2024 quarter, Madhusudan Kela held a 1.7% stake in the company.

While we don't know why he sold shares of Samhi Hotels, there are some reasons that we can guess.

#1 Muted Sectoral outlook

The Indian hotel industry, which had shown signs of robust recovery post-pandemic, is facing a challenging outlook for the first half of FY25.

While the sector had witnessed a surge in leisure travel and domestic business trips, several factors are converging to dampen the optimism.

Persistent inflation is eroding consumer spending power, leading to a decline in discretionary spending on travel and accommodation. Ongoing geopolitical conflicts and uncertainties have created a cautious environment for both domestic and international travellers.

Due to these factors, budget and economy hotels are anticipated to be relatively resilient due to their price sensitivity and focus on the budget-conscious traveller.

While the luxury segment is expected to maintain its momentum due to a resilient high-net-worth individual (HNI) clientele, the growth rate is likely to moderate compared to the previous year.

Additionally, the exceptionally strong performance in the previous year, particularly during the festive season, has set a high benchmark. Replicating or surpassing these numbers in the current financial year is proving to be a daunting task.

However, the long-term prospects remain positive, given India's growing economy. This muted sectoral outlook can be one of the reasons why the ace investor might have exited the stock.

#2 FII Selling

Another potential reason for Madhusudhan Kela's concern could be the selling by foreign institutional investors (FIIs).

In the June 2024 quarter, FIIs reduced their stake in the company by 6% from the previous quarter.

FIIs' holding in March 2024 was 69.5%, which came down to 63.5% in the June 2024 quarter. Before this, FIIs had also reduced their holdings in the December 2023 quarter.

A Look at Samhi Hotels Financials

Samhi Hotels has shown a significant improvement in its financial performance over the past three financial years.

The company's operational revenue has seen robust growth, increasing from Rs 3.2 billion (bn) in FY22 to Rs 9.6 bn in FY24, a compound annual growth rate (CAGR) of 73.2%.

While the company has not yet reached profitability, the net loss has been consistently decreasing. The net loss reduced from Rs 4.4 bn in FY22 to Rs 2.3 bn in FY24.

This narrowing of losses indicates that Samhi Hotels is on a positive trajectory toward improving its financial health.

Samhi Hotels Financial Snapshot (FY22-24)

(Rs bn, Consolidated)	FY22	FY23	FY24
Operational Revenue	3.2	7.3	9.6
Growth (%)	-
Net loss	-4.4	-3.4	-2.3

Source: Equitymaster

What Next?

Samhi Hotels has outlined a clear growth trajectory focused on expansion, optimisation, and financial strength.

The company is actively seeking acquisition opportunities to increase its hotel portfolio, as demonstrated by recent acquisitions like the ACIC portfolio.

Samhi aims to improve operational efficiency through renovations, rebranding, and optimising existing assets.

To become a profitable venture by FY25, Samhi is driving increased revenue and cost control. Additionally, the company is reducing its debt levels, which will improve its financial health and provide more flexibility for future investments.

How Shares of Samhi Hotels have Performed Recently

The share price of Samhi Hotels has gained 1.6% in the past six months.

Over the past one year, shares of the company have gained 24.6%. In 2024, the share price of the company is up 3.5%.

The company touched its 52-week high of Rs 238 on 27 February 2024 and its 52-week low of Rs 127 on 22 September 2024.

About Samhi Hotels

Established in 2010, the company has quickly grown to become a significant player in the Indian hotel industry, catering to both business and leisure travellers.

The company's portfolio spans multiple brands and categories, including upscale, midscale, and economy hotels. Some renowned brands under its management include Marriott, Sheraton, Hyatt, and Holiday Inn.

The company operates through a mix of owned, leased, and managed properties. This diversified approach allows Samhi to optimize its portfolio and leverage the strengths of each business model.

For more details, see the Samhi Hotels company fact sheet and quarterly results.

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