Description
The PPT explaining Financial Analysis of Indian Hotels on the basis of Annual Report 2010-2011 with the example to Taj Hotel chains covering topics like WACC, competitors, risks, returns, capital structure, cost of equity, leverage analysis
Corporate Finance Project
The Indian Hotels Company Limited
Flow of Presentation
? Company Overview
? Introduction of Competitors Analysed
? Risk and Return ? Capital Structure
? Cost of Debt & Equity
? Cost of Capital ? Leverage
? Working Capital
Taj Hotels Resorts and Palaces
Company Overview
? The Indian Hotels Company Limited was
incorporated in the year of 1902 ? Also known as the Taj Group of Hotels, Resorts and Palaces, it is a part of Tata Group ? Some of its esteemed guests include Prime Minister of India Dr. Manmohan Singh, President & First Lady of The United States of America and Dalai Lama ? The company showed revenues of `1724.92 crores and profit after tax of `141.25 crores in FY2010-2011
Introduction to Competitors Analysed
? EIH Hotels: ? Operate hotels under the brand name Oberoi and Trident ? Total Revenues of `1,142.95 crores and profit after tax at `64.54 crores ? Viceroy Hotels: ? Viceroy Hotels Ltd., previously known as Palace Heights Hotels (PHHL) was incorporated in 1965 ? Its major presence is in Hyderabad with operations across India ? Total Revenues are `73.61 crores and Profit after tax at `-2.29 crores
Risk & Returns
Risk And Return
? Time Period : 3rd April 2006 till 31st March 2011 ? Data collected on Daily Basis.
? Closing prices are used to calculate the Stock Returns.
? ? is calculated as
? = Covariance ( Stock Returns & Market Returns) Variance of Market
Return
Risk
IHCL vs Sensex
Capital Structure Capital Structure
Capital Structure
Total Capital: `5567 crores D/E Ratio: 0.72
Cost of Debt & Equity
Cost of Equity
? Using Capital Asset Pricing Model (CAPM)
Ke = Rf + ? ( Rm – Rf ) Where Ke = Cost of Equity Rf = Risk Free Rate ( T-Bill Rate 364 days ) = 8.7432 % (Source RBI Website) Rm = Market Returns (Sensex Returns for 2010-11) ? = 0.024 (Beta of Stock)
Cost of Equity
Ke = 8.7432 % + 0.024 ( 10.99 % - 8.7432 % ) = 8.8%
Cost of Debt
Cost of Debt Kd = Interest (1-Tax Rate) / Debt Interest = ` 122.85 Crores Tax Rate = 36.64 % Debt = ` 2339 Crores
Kd before tax = 122.85 / 2339 = 5.25% Kd after tax = 122.85 * ( 1 – 36.64%)/2339 = 3.33 %
Cost of Capital
Weighted Average Cost of Capital (WACC)
Kc = Ke * (E/(E+D)) +Kd * (D/(E+D))
Kc =5.05 + 1.42 = 6.92%
Leverage Analysis
Leverage Analysis
? Operating leverage
% change in EBIT % change in sales ? Financial leverage % change in EPS % change in EBIT ? Combined leverage
% change in EPS % change in sales
Leverage Analysis
PARTICULARS SALES (Rs. Crores) EBIT (Rs. Crores) EPS (Rs.) 2011 1724.92 222.95 1.93 2010 1520.36 218.25 2.12 % Change 13.45 2.15 -8.96
Degree of Operating leverage Degree of Financial leverage Degree of Combined leverage
2.15/13.45 = 0.16 -8.96/2.15 = -4.16 -8.96/13.45 = -0.67
Working Capital
Working Capital
(All figures in ` Crores)
CURRENT ASSETS, LOANS AND ADVANCES
Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Total LESS: CURRENT LIABILITIES AND PROVISIONS Current Liabilities Provisions Total Working Capital
2011
31.83 103.96 95.31 304.26 535.36
2010
31.25 121.67 447.12 438.12 1038.16
403.39 708.49 1111.88 -576.52
392.89 700.74 1093.63 -55.52
Thank You !!
doc_242949694.pptx
The PPT explaining Financial Analysis of Indian Hotels on the basis of Annual Report 2010-2011 with the example to Taj Hotel chains covering topics like WACC, competitors, risks, returns, capital structure, cost of equity, leverage analysis
Corporate Finance Project
The Indian Hotels Company Limited
Flow of Presentation
? Company Overview
? Introduction of Competitors Analysed
? Risk and Return ? Capital Structure
? Cost of Debt & Equity
? Cost of Capital ? Leverage
? Working Capital
Taj Hotels Resorts and Palaces
Company Overview
? The Indian Hotels Company Limited was
incorporated in the year of 1902 ? Also known as the Taj Group of Hotels, Resorts and Palaces, it is a part of Tata Group ? Some of its esteemed guests include Prime Minister of India Dr. Manmohan Singh, President & First Lady of The United States of America and Dalai Lama ? The company showed revenues of `1724.92 crores and profit after tax of `141.25 crores in FY2010-2011
Introduction to Competitors Analysed
? EIH Hotels: ? Operate hotels under the brand name Oberoi and Trident ? Total Revenues of `1,142.95 crores and profit after tax at `64.54 crores ? Viceroy Hotels: ? Viceroy Hotels Ltd., previously known as Palace Heights Hotels (PHHL) was incorporated in 1965 ? Its major presence is in Hyderabad with operations across India ? Total Revenues are `73.61 crores and Profit after tax at `-2.29 crores
Risk & Returns
Risk And Return
? Time Period : 3rd April 2006 till 31st March 2011 ? Data collected on Daily Basis.
? Closing prices are used to calculate the Stock Returns.
? ? is calculated as
? = Covariance ( Stock Returns & Market Returns) Variance of Market
Return
Risk
IHCL vs Sensex
Capital Structure Capital Structure
Capital Structure
Total Capital: `5567 crores D/E Ratio: 0.72
Cost of Debt & Equity
Cost of Equity
? Using Capital Asset Pricing Model (CAPM)
Ke = Rf + ? ( Rm – Rf ) Where Ke = Cost of Equity Rf = Risk Free Rate ( T-Bill Rate 364 days ) = 8.7432 % (Source RBI Website) Rm = Market Returns (Sensex Returns for 2010-11) ? = 0.024 (Beta of Stock)
Cost of Equity
Ke = 8.7432 % + 0.024 ( 10.99 % - 8.7432 % ) = 8.8%
Cost of Debt
Cost of Debt Kd = Interest (1-Tax Rate) / Debt Interest = ` 122.85 Crores Tax Rate = 36.64 % Debt = ` 2339 Crores
Kd before tax = 122.85 / 2339 = 5.25% Kd after tax = 122.85 * ( 1 – 36.64%)/2339 = 3.33 %
Cost of Capital
Weighted Average Cost of Capital (WACC)
Kc = Ke * (E/(E+D)) +Kd * (D/(E+D))
Kc =5.05 + 1.42 = 6.92%
Leverage Analysis
Leverage Analysis
? Operating leverage
% change in EBIT % change in sales ? Financial leverage % change in EPS % change in EBIT ? Combined leverage
% change in EPS % change in sales
Leverage Analysis
PARTICULARS SALES (Rs. Crores) EBIT (Rs. Crores) EPS (Rs.) 2011 1724.92 222.95 1.93 2010 1520.36 218.25 2.12 % Change 13.45 2.15 -8.96
Degree of Operating leverage Degree of Financial leverage Degree of Combined leverage
2.15/13.45 = 0.16 -8.96/2.15 = -4.16 -8.96/13.45 = -0.67
Working Capital
Working Capital
(All figures in ` Crores)
CURRENT ASSETS, LOANS AND ADVANCES
Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Total LESS: CURRENT LIABILITIES AND PROVISIONS Current Liabilities Provisions Total Working Capital
2011
31.83 103.96 95.31 304.26 535.36
2010
31.25 121.67 447.12 438.12 1038.16
403.39 708.49 1111.88 -576.52
392.89 700.74 1093.63 -55.52
Thank You !!
doc_242949694.pptx