Shares of Indian Hotels Company Ltd (IHCL) jumped as much as 6 percent on Thursday, as the company turned debt-free aided by cost optimisation measures.

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At 1219 am, shares of IHCL - which houses brands and hotels like Taj, SeleQtions, Vivanta and Ginger - were trading 4.5 percent higher at Rs 246.45 on BSE.

Indian Hotels Company stock has touched an intraday high at Rs 249.6, up 5.8 percent on BSE today. (Source: BSE)

Robust quarterly numbers and a positive business outlook also lifted investor sentiment for the stock.

Puneet Chhatwal, Managing Director and Chief Executive Officer, IHCL, said that the business outlook is positive with April and May trending ahead of 2019. He added, “Our industry-leading pipeline along with scaling up of high margin new business like Ginger, amã Stays & Trails and Qmin will provide further impetus”.

The management has indicated that the room demand for the month of March, April and May 2022 is strong with revenues expected to stay ahead of pre-pandemic levels.

In March, a JLL report had said that revenue per available room in the last quarter of 2021 grew over 100 percent.

The hospitality sector had taken a beating due to the COVID pandemic but things are picking up considering the demand recovery. In late March, Chhatwal had told CNBC-TV18 that the hospitality business was picking up at a healthy pace.

IHCL has recorded the highest number of new hotel signings in India for the second consecutive year, totalling 19 new hotels.

Room supply in Indian markets is expected to grow by 5-6 percent while demand is expected to grow at a much faster pace with strong traction from domestic leisure business, an expected recovery in business and corporate travels.

This will help occupancies to further improve and room rentals to remain high in FY2023, said brokerage firm Sharekhan which has a ‘buy’ call on IHCL shares.

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“Going forward, the company may generate annual FCFF (post capex/pre-interest) of Rs 8-9 billion annually which can be utilised to tap growth opportunities or serve as a buffer to weather any fresh Covid induced disruptions in the near term,” ICICI Securities added.

The brokerage firm that has a ‘buy’ call on the stock, believes that IHCL is well-poised to benefit from the expected recovery in the hotel business cycle from H1 FY23.

ICICI Securities is enthused by the company’s efforts to leverage its existing brand equity to focus on new business segments, focus on cost optimisation, asset-light management contract model to expand room portfolio, and net cash balance sheet post the recent fundraising activities.

First Published:Apr 28, 2022 1:59 PM IST