High debt weighs on Hotel Leelaventure’s March quarter results

Hotel Leelaventure Ltd is still not out of the woods as it is burdened with high debt, huge capacity and stagnant occupancy rates, which are weighing on profitability. It was not surprising that the stock fell 4% after the earnings announcement on Monday.

The firm reported a wider loss of Rs.142 crore for the fifth consecutive quarter, against a loss of Rs.96 crore in the December quarter, because of high overhead costs from the launch of a new hotel in Chennai and ballooning interest costs. Total debt at the end of the March quarter stood at Rs.4,602 crore against Rs.4,235 crore during the same period last year. Debt remained high despite a restructuring and sale of an IT park in Chennai, because of interest costs on the capital expenditure that it incurred five years ago.

 

 

 

Interest costs rose 7% from a year ago to Rs.123 crore, slightly slower than the 9% growth in the previous quarter. Short-term liabilities have almost doubled to Rs.2,201 crore from a year earlier.

“The loans which are repayable in the next one year have been moved to short-term debt as per Securities and Exchange Board of India guidelines. We are planning to sell a hotel to repay the short-term liabilities in the next one year,” said Krishna Deshika, director (finance) and chief financial officer of Hotel Leelaventure.

Raw material costs, employee expenses and other costs (power, oil and fuel) saw a sharp jump in the March quarter from a year ago because of the launch of the Leela Palace in Chennai in January. Depreciation cost also spiked up 23% to Rs.45 crore in the March quarter from a year ago. “We will not become profitable until the debt comes down,” he said.

Moreover, the economic slowdown continues to weigh on Hotel Leelaventure. Foreign tourist arrivals grew at 2.3% in the March quarter, lower than the 10.9% growth clocked during the same period last year. Average revenue per room was down 1% to Rs.6,915 from a year ago and occupancy rates have improved slightly to 71% in the March quarter from 69% last year, according to industry data from a brokerage house.

For Hotel Leelaventure, the average revenue per room has risen 1.3% to Rs.11,570 for the full year. Occupancy rates have seen a slight increase to 62% in FY13 from 61% in the previous year. The stock is down 30%, underperforming the S&P BSE 500 index, which is up 22% in the past one year. Unless debt is reduced and occupancy levels improve, the stock may continue to remain under pressure.

 

Source : http://www.livemint.com/Money/pyx4QkEWRnMMBhqb1NK19K/High-debt-weighs-on-Hotel-Leelaventures-March-quarter-resul.html