Below is the edited transcript of Rajen Shah’s interview with CNBC-TV18. Full Article on Money Control Website
On Indian Hotel
A: It is a wonderful time to get into this company. About six months back, when I talking about multi-bagger ideas, the
Sensex
then was about 18,000-18,500 and I had recommended East India Hotels at
about Rs 83-84 levels. Fortunately, East India is at the same level
though the markets have come down by almost about 15% from that level. I
am talking about this because six months back, when EIH was at Rs 83-84
even Indian Hotel was at Rs 84. While EIH is at same level, Indian
Hotel has come down from level to current levels of Rs 53. At Angel
Broking we have switched from EIH to Indian Hotel because Indian Hotel
looks very promising at this point of time, even EIH looks very
promising but since this stock has come down significantly we have
switched from EIH to Indian Hotels. We own this stock in our PMS.
Way back in 2001 there was leading global hospitality consulting firm
Panel Care Foster, after the unfortunate WTC attack, they had valued
the assets of Indian Hotel at Rs 500 per share. The stock then was 10
paid up, today its 1 paid up, so Rs 50 per share where the assets valued
by the leading hospitality consulting firm.
Over the past ten years property prices have quadrupled; anything has
gone up four times, so logically that Rs 50 works out Rs 200 at the
current prices. We also need to keep in mind that in 2001, Indian Hotel
had about 65 properties and today they have 109 properties. Forty
properties of these 109 properties are owned properties. Logically if
you take price of 300 crore property, 40 owned properties will work out
12,000 crore whereas current market cap is about 4,000. So you are
getting something which is worth Rs 200 for about Rs 50, so almost at
30% of its actual intrinsic value.
This story is that over the next four years Indian Hotel would be
getting very aggressive. The management has said is that over the next
four years every month it will be opening new property. So, over the
next four years we will see 48 properties coming into Indian Hotel. At
the end of four years the total number of properties would be somewhere
around 158-160. Two things have happened; rupee has depreciated 20%, so
that should be positive news for foreign tourists looking at India. For
them India becomes 20% cheaper.
Secondly, I believe that this phase which Indian economy and Indian
market is going through should be over in the next six-nine-12 months.
These phases do come and they go equally fast. Even if you discount that
this slowdown would carryon, 2013-14 would be extraordinary for the
hotel industry. Indian Hotel could end up reporting very good numbers.
Ratan Tata and Raymond Bickson clearly mentioned at the AGM that the
foreign operations of this company which are currently are not too good
shape should turnaround in the next 18 months.
So, on all that Indian Hotel looks cheap, it is a growth stock and a
value stock. The other interesting thing is, Tata Sons have picked up
3.6 crore shares at the price of Rs 104 and the stock is available at Rs
53. Tata Sons will again be picking up 4.8 crore shares at a price of
Rs 104 sometime before June because the warrants are getting converted
into shares. I am very sure that Tatas would certainly subscribe to that
and convert those warrants into shares. While the promoter group itself
is putting in 900 crore by pumping money at Rs 104 per share, it makes
sense for us to get in at Rs 54. Downside is very limited; upside could
be as high as 100% in two years.
