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!
Table of Contents
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%.
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
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 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.
| 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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