In continuation of this series on reviewing annual reports, here is my review of the FY15 report of India’s largest hotel company, Indian Hotels.
Click here to download the PDF review (11 MB file), or read it in the panel below.
Please note that this review is just to help you dig deeper, in case you are interested to read and understand more of the reviewed company. Don’t treat this as an end to your quest for learning more about businesses and industries, and how to analyze them.
In fact, this is just the beginning. 🙂
Let me know your thoughts on this review in the Comments section of this post…and also share any suggestion(s) you may have to make future reviews better and easier for your understanding.
Statutory Warning: This is NOT an investment advice to buy or sell shares. Please make your own decision, as blindly acting on anyone else’s research and opinions can be injurious to your wealth. I do not own the stock, but despite this, my analysis may be biased, and wrong. I have been wrong many times in the past. I am a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014 (Registration No. INH000000578).
Loved this review. More please 🙂
Thanks Amit! Yeah, more’s on the way 🙂
Thank you for the good analysis…!
I have two questions…
1) How to evaluate a company which has more intangible assets than tangible one (e.g. IT, Pharma, Finance cos). Could you please share analysis of an IT or Pharma company..?
2) Information available in public domain is mostly discounted in the price. Common investor is not privy to ‘privileged’ info. How does a common investor ensure that timing of his position (buy or sell) is accurate or near accurate?
Thanks again..!
Thanks Yogesh!
1) How to evaluate a company which has more intangible assets than tangible one (e.g. IT, Pharma, Finance cos). Could you please share analysis of an IT or Pharma company?
I will do an IT company soon, though I will not be talking about valuations here. Pharma is something I don’t understand and thus may not be able to help here.
2) Information available in public domain is mostly discounted in the price. Common investor is not privy to ‘privileged’ info. How does a common investor ensure that timing of his position (buy or sell) is accurate or near accurate?
You can’t time that! And if you try to seek ‘privileged’ info and benefit from it, you may need to face the stock market regulator. 🙂 The best idea is to keep studying businesses, put the good ones in a watchlist in case the valuations are not fine, and then buy them when they reach your valuation levels.
Hope this helps. Regards.
Hi Vishal,
In the notes section on the last page, you have mentioned in point 2 that writeoffs of past investments have eaten into profits and thus cash flows which have led to to greater borrowings. Wouldn’t these write offs be non cash charges? The consolidated cash flow statements shows around Rs. 1386 cr purchase of current investments. I would conclude that the borrowings this year were to refinance long term debt and also to partly pay for the purchase of current investments. Please clarify and feel free to correct me – will be a learning experience!
Thank you 🙂
Disclosure – I haven’t looked at the actual annual report in detail.
Thanks for your comment Swapnil!
Well, look into their Consolidated Income Statement (Pg. 143), and you’ll find an exceptional item (a loss), which is largely a result of provision for diminution in value of long-term investments (given that the cost the company paid for these investments has now been assessed to be lower than their fair value; refer Note VI on Pg. 170). This exceptional item in the Income Statement has erased all profits earned prior to that adjustment, which also impacted its operational cash flows.
Hope this helps. Regards.
Thanks for the clarification Vishal. However, they have added back Rs. 306 cr (provision for dimunition in value of investment) in the cash flow statement, haven’t they?
Yes Swapnil. Let me take the “cash flow” part back. 🙂 So the money has gone into thin air. 🙂
As a newbie who is learning the ropes for reading balance sheets, and arriving at a valuation for a company, I found this immensely useful. I hope to learn more from you.
Thanks Venkatesh! All the best.
1st time in my life seen this type of analysis…Hats Off sir !
Thanks a lot!
Vishal, this is another excellent review. Thank you so much for the same.
Awaiting the next one. 🙂 Cheers!
Thanks a lot, Anand. 🙂
Awesome Vishal. Had tried reading so many annual reports, but either lost interest midway or couldnt understand some of the jargon. Your Exide and this review has started giving me pointers on what exactly to look in the reports. Thanks so much for sharing your knowledge with us.
Great to know that Liju. Thanks, and all the best for your own AR reviews.
Very good effort made my Safal Niveshak and it’s a great step towards educating the investor specially who doesn’t have much finance knowledge like me. I also read your previous report of exide industries. I am very much thankful to you for all your effort. Please keep on sending reports with your analysis that will certainly help investors.
Thank you,
Pramod Kumar
Thanks for your kind words, Pramod!
Hello Vishal ji….
Many heartily wishes to you on this guru purnima.
You are our real life finance guru.
Regards,
Kishor
Thanks for your kind words, Kishor! Regards.
Yet Another Brilliant analysis!
On Indian Hotels! – Business seems simple! Made complicated due to acquisitions 🙂
Thanks Karthik!
Vishal ji:
One thing that needs to be kept in mind is the change at the TOP in Tata Group.
i.e the moving out of Ratan Tata and entry of Cyrus Mistry.
One of the first thing that happens when you move into an old property is you dig deep and throw out all the junk in the “Hidden Corners” of the property and then you go about upgrading the property…
I’ve seen it in SBI also when there is a change in top management the first year if always a bad one as all the junk hidden by the fascade is chucked out..
You always want to remove the clutter before you start rebuilding..
So most Tata group companies are in this stage of operation and could provide an investor a very good entry point as the stage is set for future growth and profits..
=happy investing
whatsup-indianstockideas
Thanks for sharing your thoughts, Mr. Prahalad. Yes, the new management seems to be clearing the clutter, which is a good sign. Regards.
Great work and analysis of Indian Hotels.
Thanks Vishal
Thanks Ricardo!
Hi Vishal
This is the most effective way to teach the investor at least they will dare to open the 200-300 page annual report and come to know what exactly we have to see in annual report with minimum time and maximum output .Slowly -2 investor will get interest to read the annual report .I am really very impressed.thank you very much for your valuable contribution to educate the investor.
Thanks for your kind words, Giriraj! I hope this nudges more people to read annual reports. Regards.
Thanks Vishal Sir,
It’s very insightful and encouraging. Earlier I just used to analyse the figures and see for notes, from now on I would be rummages the other sections for Information too.
Great Sahil…thanks! All the best.
Hi,
Interesting Analysis as always. Again liked the way you compared with EIH.
Coming to Indian Hotels, though it is evident new mgmt is clearing (or at least trying to) clear the mess created in the past and being TATA group, you can expect some level of ethics here 🙂 (as is evident from salary cuts), still I feel as a Business proposition, Hotels are not something which I like. It is dependent on so many external factors beyond one’s control that there is no consistency left. There is no big moat except some brand value and that too is eroding fast with entry of new chains of hotels. There are better businesses around if one looks diligently.
All in all, a very good analysis.
Happy Investing 🙂
Indeed Sanjeev! Thanks for sharing your thought.
Hotels are nice (though expensive) to stay in…but hotel stocks are best to stay away from 😉
Thanks for the efforts Vishal-ji. This gives a good pointer on “how to evaluate a stock and a business”?
Thanks Sundar!
Awesome analysis and thank you for sharing the good work you do. I concur with many of the reviewer that going through more than 200 pages is very boring task, I just gone through Thomas cook report and I felt very boring going through lots of pages and could not cared to read last few pages due to lots of numbers which I could not digest. Thank you very much for sharing your analysis. It definitely help us learn and add different dimension in thinking. This is clearly shows that you have put lots of effort to analyse which would be boring for most of the folks. -Balvant
Great to know that, Balvant. Thanks!
Good analysis… Objective and to-the-point…