The Telegraph
Wednesday , March 12 , 2014
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Indian Hotels feels the pinch

Mumbai, March 11: Indian Hotels Company Ltd (IHCL) — the Tata group’s hospitality venture — reckons it will have to make an additional Rs 400 crore non-cash provision in its standalone results for 2013-14 as a result of the anticipated diminution in the value of its long-term investments.

The provision in the consolidated results of IHC will be around Rs 100 crore, the company said in a statement today.

The impairment estimates were made after a year-end review. The final figures will be reflected in the full year results for the year ending March 31 that will be published on May 30.

IHCL said the impairment in its long-term investments was the result of “a sustained depression in the macroeconomic and market environment internationally as also in the domestic market”.

This has had an adverse impact on some of its investments that it didn’t specify.

“With economic uncertainty expected to continue over the near and medium term, it has had an impact on the downward revision of projected cash flow expectations from some of the underlying affected investments,” the company said.

It added that the company’s financial covenants related to its borrowings are unaffected by the impairment of investments.

Last year, Indian Hotels had written down the carrying value of its long-term strategic investments in Taj International Hotels (HK) twice: by Rs 287 crore in the second quarter of 2013-14 resulting in a sharp and sudden loss that quarter, and by Rs 305 crore in the fourth quarter of 2012-13.

The Hong Kong subsidiary holds the group’s investments in various international entities, including Orient Express Hotels.

The write-down is associated with its failed attempts to acquire Orient Express, the Bermuda-based owner and manager of 45 luxury hotels, restaurants, tourist train and river cruise properties in 22 countries, which it relentlessly pursued since October 2007.

Last November, the Tatas finally dropped an all-cash offer for Orient Express that it had made in October 2012 to acquire all the outstanding Class A shares of the luxury hotel chain for $1.86 billion. The Tatas had made the buyout bid along with Ferrari chairman Luca Cordero di Montezomolo and Paul White, the former chief executive of Orient Express, who had rudely spurned their bid for a grand alliance six years ago.

The decision to abandon the Orient Express bid came after Indian Hotels announced it had suffered a Rs 300.32 crore loss in the quarter ended September 30 last year.

In the third quarter ended December 31, the company reported a net profit of Rs 65.51 crore on revenues of Rs 564.24 crore.

The company had suffered a loss of Rs 276.61 crore in the financial year of 2012-13 on revenues of Rs 1,875.86 crore.

On Tuesday, the stock closed unchanged at Rs 69.90 on the Bombay Stock Exchange.