This Jhunjhunwala-owned hotel stock has rallied 32% so far in September

Shares of Indian Hotels Company (IHCL) hit a fresh record high of Rs 185.05, ralling 7 per cent on the BSE in Wednesday’s intra-day trade, on hopes of business revival following unlocking of the economy and pick-up in travel. The stock is trading higher for the fourth straight day, surging 24 per cent during the period.

Thus far in the month of September, the stock of the Tata Group company has zoomed 32 per cent, as compared to 3.2 per cent rise in the S&P BSE Sensex. Ace investor Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala collectively held 2.1 per cent stake in IHCL as on June 30, 2021.

IHCL is set to post its sharpest monthly gain in over two decades. Earlier, in August 2021, the stock had rallied 35.7 per cent during the month. The previous single-month record gain was way back in August 1999, when the stock had zoomed 52 per cent in a single month.

On August 23, IHCL announced Rs 3,000 crore fund raising plan by way of a rights issue to the existing shareholders of the company. The objective of the issue is to meet the company's financing needs for capital expenditure, growth plans and debt repayment & will be finalised in consultation with the merchant bankers, the company said.

IHCL and its subsidiaries bring together a group of brands and businesses that offer a fusion of warm Indian hospitality and world-class service. These include Taj – the iconic brand for the most discerning travelers and the World’s Strongest Hotel Brand and India’s Strongest Hospitality Brand as per Brand Finance 2021, SeleQtions, a named collection of hotels, Vivanta, sophisticated upscale hotels and Ginger, which is revolutionising the lean luxury segment.

The Tata Group holds 40.75 per cent stake in IHCL through Tata Sons (38.09 per cent stake) and other Group companies. Tata Sons has demonstrated its financial support to IHCL over the years, by subscribing to various equity-raising activities of the company and expects the same to continue going forward as well, should there be a need. The company also enjoys considerable financial flexibility and significant lender/investor comfort by virtue of the Tata Group lineage.

Akin to other hotel players, the rating agency ICRA expects the company’s revenue and profits to reach pre-Covid levels only over the medium term, although FY22 is expected to be significantly better than FY21.

The situation is still evolving and is contingent on the pace of vaccination, efficacy of vaccines, infection rates and the possibility of a third Covid-19 wave, or any other exogenous events. The proposed equity infusion and the consequent debt reduction, apart from better accruals stemming from business recovery, are likely to improve the coverage metrics going forward, ICRA said in rating rationale.

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