Indian Hotels Company Ltd Vs EIH Ltd

Indian Hotels Company Ltd Vs EIH Ltd: Covid-related lockdowns have now been lifted completely! This is a statement we all have been waiting to hear for the last two years. People are fed up with the WFH and now need a vacation.

But it’s not just the people who want to vacation that rejoice in this news. It is also the hospitality industry that has been stifled for far too long. One of the most severely hit industries, the hospitality sector can finally begin operating as usual.

In this article, we will take a look at 2 hard to ignore hospitality stocks i.e. Indian hotels Company Ltd vs EIH Ltd, and see how the companies have managed to perform so far. Keep Reading to find out!

Industry Overview

The year 2020 has been the worst year in the history of the Indian hospitality industry. Lockdowns and restrictions on movements forced people to stay inside making it worse for the tourism and hospitality business. 

As per the estimates, the Indian tourism industry had lost more than Rs 90,000 crores in revenue by December 2020. The occupancy rate fell to 20%  and the Revenue per Available Room (RevPAR) was down by 80%.

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The Foreign tourist arrivals (FTAs) in the year 2020 saw a significant decline to 2.68 million from 10.93 million in 2019. 

According to ICRA, in FY22, the hospitality industry will witness a growth of over 120% in revenues and a 13-15% growth in their operating margins which will be supported by the opening up of the economy and cost optimization measures taken by the companies.  

About the Company

Indian Hotels Company Ltd

Indian Hotels Company Ltd

The Indian Hotels Company Limited (IHCL), a subsidiary of Tata Group, was incorporated in the year 1902. Taj Mahal Palace & Tower in Mumbai was the first hotel opened by the Tata.

After that, it expanded its operations by opening a Tower Wing to The Taj Mahal Palace, Mumbai, the Taj Fort Aguada, Goa, and palaces such as Taj Lake Palace, Udaipur, and Rambagh Palace, Jaipur.

It also expanded outside India by launching Taj Pamodzi, Lusaka in Zambia. It also manages a portfolio of hotels, resorts, jungle safaris, palaces, spas, and in-flight catering services.

EIH Ltd

EIH Ltd

EIH Limited, a part of the Oberoi group, was established in 1934. Formerly known as the East India Hotels, EIH manages 20 hotels under their luxury brand of Oberoi Hotels & Resorts and 10 five-star properties under their Hotels brand- Trident. The company owns and operates 29 luxury hotels and 1 river cruise and 1 motor vessel in 7 countries 

Their services also extend to airline catering, management of restaurants and airport bars, travel and tour services, car rentals, project management, and corporate air charters.  

Indian Hotels Company Ltd VS EIH Ltd – Operational Highlights

Details
(As of FY21)
Indian Hotels Company Ltd EIH Ltd
Number of Rooms 27,604 4567
Number of Hotels 221 30
Number of Employees 25,906 8086

Indian Hotels Company Ltd VS EIH Ltd – Revenue

The revenue of both the hospitality giants has been affected by the nationwide lockdown induced by the pandemic. 

Indian Hotels have higher earnings than EIH. This is because of the large-scale operations that increased their profitability. To combat the slowdown caused by the pandemic IHCL established an online presence through ventures such as Hospitality@Home and Qmin. 

EIH Ltd has seen a significant decline in its revenue as well. The company has been resilient and is focusing on innovative operations to improve its revenue from core operations.

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Revenue          
Particulars 2017 2018 2019 2020 2021
Indian Hotels Company Ltd (Rs in Cr) 4,021 4,104 4,512 4,463 1,575
(Revenue growth in %) 2.00% 10.00% -1.00% -65.00%
EIH Ltd (Rs in Cr) 1,529 1,599 1,811 1,596 497
(Revenue growth in %) 5% 13.00% -12.00% -69.00%

Indian Hotels Company Ltd VS EIH Ltd – Profit Margins

The gross profit margin as a ratio indicates how well the company is able to manage its direct expenses in relation to the sales. A higher ratio is considered better. Both the companies have seen a decline in their gross profit ratio in FY21 due to a decrease in sales.

The operating profit margins measure how much profit is the company able to earn through its core business operations after accounting for its variable cost. In the given case both the companies had a growing trend before it became negative in FY21.

The net profit margin is an important metric that measures how much net income is generated as a percentage of revenues received by the company. EIH had a higher ratio than Indian hotels. However, both recorded a negative ratio in FY21.

Profit Margin ratios          
Particulars 2017 2018 2019 2020 2021
Gross Profit Margin (%)
Indian Hotels Company Ltd 16.52 17.84 20.23 24.64 -12.5
EIH Ltd 22.96 25.33 26.21 23.09 -47.07
Operating Margin (%)
Indian Hotels Company Ltd 9.08 10.5 12.97 15.58 -38.51
EIH Ltd 14.57 17.99 18.89 13.92 -73.75
Net Profit Margin (%)
Indian Hotels Company Ltd -2.07 1.54 5.42 7.86 -44.07
EIH Ltd 6.97 11.19 7.55 10.35 -63.3

Indian Hotels Company Ltd VS EIH Ltd – Return Ratios

ROE is a gauge of a corporation’s profitability and how efficiently it generates those profits. A positive and higher ROE is ideal. Both Indian Hotels and EIH Ltd recorded a negative ROE in FY21.

ROCE is a metric that takes into account the debt of the company and estimates how efficiently the company is able to generate profits from its capital employed. The ROCE for both the companies is negative.

A higher EPS indicates that the company has higher profits as the ratio is calculated by dividing the net income by the total outstanding shares of the company. The EPS for both the companies is negative as they made losses in FY21.

Dividend yield shows how much a company pays out in dividends each year relative to its stock price. Generally, matured companies have a higher dividend yield. A zero dividend yield indicates that the company is facing some economic problems.

Return ratios          
Particulars 2017 2018 2019 2020 2021
Return On Equity (ROE)
Indian Hotels Company Ltd -3.26 1.89 5.74 8.06 -17.34
EIH Ltd 4.19 6.56 4.65 5.39 -10.08
Return On Capital Employed (ROCE)
Indian Hotels Company Ltd 5.57 7.4 8.97 10.81 -6.25
EIH Ltd 6.4 9.11 7.77 6.2 -10.46
Earnings Per Share (EPS)
Indian Hotels Company Ltd -0.64 0.85 2.41 2.98 -6.05
EIH Ltd 0.18 0.31 0.23 0.26 -0.59
Dividend Yield
Indian Hotels Company Ltd 0.28 0.31 0.32 0.67 0.36
EIH Ltd 0.75 0.57 0.44 0 0

Indian Hotels Company Ltd VS EIH Ltd – Valuations

The sectoral PE for both companies is 50.98. However, as both the companies made a loss in FY21 their PE ratio stands at zero.

The PB Ratio indicated the amount the investors are willing to pay for a share of the company’s assets. It is also used to identify if the stocks are overvalued or undervalued. 

Valuation Parameter          
Particulars 2017 2018 2019 2020 2021
Price to Earnings Ratio (PE)
Indian Hotels Company Ltd 0 150.15 64 25.13 0
EIH Ltd 66.74 50.75 88.01 25.27 0
Price to Book Value (P/B)
Indian Hotels Company Ltd 4.99 3.62 4.22 2.04 3.62
EIH Ltd 2.68 3.15 3.87 1.2 1.87
EV/EBITDA
Indian Hotels Company Ltd 23.35 23.33 22.3 10.18 -85.18
EIH Ltd 20.2 23.26 25.04 10.87 -25.35

Future Prospects

Indian Hotels Company Ltd: The company is going with the strategy of R.E.S.E.T which stands for Revenue growth, Excellence in guest well-being, experience, and operations, Spend optimization, Effective asset management, and Thrift and financial prudence. It is also focused on providing quality services to its customers while optimizing its cost.

EIH Ltd: Post the pandemic the company has been more focused on innovation and quality services. Securing long-term capital with low cost while maintaining the best practices within the organization. EIH is also looking for strategic alliances with other companies in the hospitality sector to grow its reach.

In Closing

In this article, we looked at two of the biggest hospitality companies in India. The companies have been resilient in the face of the pandemic and are bouncing back from the losses.

The future performance will depend majorly on the economic situation along with the strategies used by them. That’s all for this post on Indian Hotels Company Ltd VS EIH Ltd. Happy Investing!

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