Industry Analysis

Tourism in India is the third largest foreign exchange earner of the country. The booming
tourism industry has had a cascading effect on the hospitality sector with an increase in the
occupancy ratios and average room rates. As per world travel and tourism Council (WTTC),
India is one of the favorite tourist destinations from the year 2009 and will continue to be one
of the favorite tourist destinations. Further, the Travel and Tourism Competitiveness Report
by World Economic Forum, has ranked India at the sixth place in tourism and hospitality.
The Government of India is working to achieve one per cent share in world's international
tourist arrivals by 2020 and two per cent share by 2025.
However, this year, the Travel and Tourism Industry’s performance has been low worldwide.
In India, its contribution this year was 9.2% of the total GDP, marginally lower when
compared to 9.4% in the previous year. There can be various factors responsible for this:

 The interest rate hikes by the Federal Reserve in United States have had a predictable
adverse effect on the emerging markets.
 We continue to be impacted adversely by GST for published tariffs for hotel rooms
charging 7,500 and above. Much lower rates of between 6% to 10% in Asian
countries such as China, Thailand and Malaysia attract leisure travelers away from
India.
Company Analysis
a) Chalet Hotels

Part of the K. Raheja Corp, Chalet Hotels Limited (CHL) is an

owner, developer and asset manager of high-end hotels in key
metro cities in India.

They are known for efficiently designed assets, backed by

leading estate developers. The hotels also provide locational
advantages - properties located in new business centres.

Moreover, they have partnerships with leading global hospitality

brands. All this is attributed to their team driving efficiencies.

b) East India Hotels

 EIH Limited, under the aegis of The Oberoi Group, operates
hotels and cruisers in five countries under the luxury 'Oberoi'
and five-star 'Trident' brands.

The Oberoi Group is recognised as a premium hospitality

company. The Oberoi Group’s Hotels were voted as the best
business hotel chain by TripAdvisor. The Company’s hotels in
India and abroad continue to be awarded and recognised by
travellers and the hospitality Industry. The Oberoi, New Delhi
has completed its first full year of operations. This property has
set very high benchmarks in room rates and financial
performance.

Ratio Analysis
Profability
 Profit margin = PAT/Sales= 7.34%
 Return on assets = PAT/ Average total assets
 Assets turnover = Sales/ Average total assets
 Sales is the same as Rev from Operations (Net)
 Return on equity = PAT/ Average sh. Equity= -1.11%
 Earnings per share= PAT/ WA equity shares
 Operating profit margin = NOPAT/ Sales
 Operating profit on assets = NOPAT/ Average Operating assets
Net Income analysis
Generation of revenue

Revenue 31-Mar-19   31-Mar-18   % Change

Revenue from operations 9,871.73 100% 7,955.47 100% 24%
Room income 5,340.51 54% 4,855.89 61% 10%
Food, beverages and
smokes 3,015.82 31% 2,821.93 35% 7%

 In FY 18-19 The company majorly earned revenue from Room Income (54%) and
sale of Food, Beverages and smokes (31%).
 Compared to FY 17-18 revenue room income increased by 10% and food, beverages
and smokes increased by 7%

Operating Expenses

Expenses 31-Mar-19 % of Revenue 31-Mar-19 % of Revenue % Change

Total Operating
Expense 6,670.40 68% 5,504.65 69% 21%

 In FY 18-19 operating expenses increased w.r.t FY 17-18 by 21%, but expenses as a

percentage of total revenue decreased to 68% compared to 69% in FY18
 21% increase in operating expenses is justified as revenue has also increased by 24%
w.r.t FY 17-18
Finance Cost

Finance Cost 31-Mar-19 % of Revenue

Interest Expense 2,320.87 24%
Exchange differences regarded as adjustment to borrowing cost 258.64 3%
Total 2,651.51 27%

 Total Finance Cost is around 27% of revenue and is the reason company is incurring
losses
 Company is reducing its debt by paying interest expenses with cash generated from
operations

 The finance cost for the current year was impacted by Rs 258 million on account
of foreign exchange fluctuation on External Commercial Borrowings.
 Company rationale is to reduce debt and increase equity and with reducing debt and
recent IPO has brought debt to equity ratio down from 4.5 to .97
  Net Income - Loss of 10.975 Crores

Overall Evaluation

Chalet Hotels Ltd is backed by Raheja group and is targeting corporate customers which
form about 85% of total customers. With recent IPO in 2019 company has raised its equity
by Rs 950 million and planning to open 2 more hotels in Mumbai. Company is trying to
balance its capital structure and is reducing debt due to which company is incurring losses.
Cash flow from operation is Rs 3655.2 million which is 47% than previous year’s Rs
2,489.11 million. So debt repayment is sustainable. Debt to equity ratio has decreased
from 4.5 to 9.7. Apart from 2 litigation one from HAL in Bangalore and Four Seasons
hotel in Vashi, Mumbai company is doing good. As mentioned in the auditor report
company has not created any provision for litigation against it in Four Seasons hotel.

Valuation Ratios
 EV/Net Sales(x) 8.50   3.57   3.70  
   EV/Core
23.06   9.80   6.34  
EBITDA(x)
   EV/EBIT(x) 34.34   50.30   9.19  
   EV/CE(x) 2.39   0.78   0.77  
EBITDA 363.736 Crore
Revenue from operations- 9871.73

Other expenses 3659.04

Indian AS 115 107 Cr
Quality of Earning

Chairman’s letter, Director’s report, Auditor’s report and Management Discussion

and Analysis

Buy Or Sell recommendation

https://www.equitymaster.com/research-it/sector-info/hotels/Hotels-Sector-Analysis-
Report.asp
https://www.ibef.org/industry/indian-tourism-and-hospitality-industry-analysis-presentation
https://www.eihltd.com/