ITC upbeat on its hotel business

Fri, 15 Jan 11:30 am

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After witnessing a shaky start, the Indian stock markets slipped into the negative during the previous two hours of trade. Currently, persistent buying activity is being witnessed in sectors like FMCG, realty and power. However, selling pressure is being witnessed in stocks from the oil and gas, capital goods and IT sectors.

The BSE Sensex and the NSE Nifty are trading in the negative, down by 5 points and 1 point respectively. Midcap and small cap stocks are however trading in the positive, up by 0.6% and 0.9% respectively. The rupee is trading at 45.67 to the dollar.

As per a leading business daily, ITC expects to add 8 to 10 hotels in India in the next 3 to 5 years to the 110 that it already operates. This is on the back of the company's expectation that India's growing economy will boost the demand for rooms going forward. The company will add two properties in FY11 at Chennai in south India and Kolkata in the eastern region. There are many other projects in the pipeline too. It may be noted that the company had said earlier that it plans to invest about US$ 2 bn on its hotels business over five years. Further, the management expects occupancy levels to pick up on the back of improving market conditions in the coming months. Volumes too are improving and the company is hopeful to see a rise in yields as well. Average room rates are currently 8% to 10% below last year's levels, and are expected to pick up by March. It may be noted that the company's hotels business currently contributes to about 3% of its overall topline. The stock of ITC is currently trading higher on the bourses.

Rallis India announced its 3QFY10 results yesterday. The company's topline suffered a small decline of 4% during the quarter on a YoY basis. It saw a strong 6.7% jump in operating margins which boosted its operating profits by 43% YoY. Buoyant other income and lower taxes combined with strong operating performance led to a strong bottomline growth of 55% YoY during the quarter. Its bottomline for the nine month period grew 29% YoY on the back of a 3% growth in topline during the same period. It may be noted that the company caters to both the domestic as well as the export markets. During the quarter, the domestic business recorded handsome gains in the marketplace with farmers showing a preference for some of the company's latest product offerings. The exports business however was rather sluggish and this led to the company's topline suffering a marginal fall during the quarter. Outlook on the domestic side appears positive as planting so far for the Rabi season has shown improvement. The stock of Rallis is trading lower currently.