Security Analysis & portfolio management project done on the Indian hotels company limited or the TAJ group of Hotels.
Prediction of share price of the company and managing the portfolio of IHCL,SBI and SAIL
The Hotel Industry comprises a major part of the Tourism industry.
Historically viewed as an industry providing a luxury service valuable to the economy only as a foreign exchange
the industry today contributes directly to employment (directly employing around 0.15 million people), and
indirectly facilitates tourism and commerce.
Prior to the 1980s, the Indian hotel industry was a slow-growing industry, consisting primarily of relatively
static, single-hotel companies. However, the Asiad, held in New Delhi in 1982, and the subsequent partial
liberalization of the Indian economy generated tourism interest in India, with significant benefits accruing to the
hotel and tourism sector, in terms of improved demand patterns.
Growth in demand for hotels was particularly high during the early 1990s following the initiatives taken to liberalize
the Indian economy in FY1991, as per the recommendations of the International Monetary Fund (IMF). The
euphoria of the early
1990s prompted major chains, new entrants and international chains to chalk out ambitious
capacity additions, especially in the metropolitan cities. However, most of these efforts were directed towards the
business travelers and foreign clientele.
In recent years, the hotels sector has grown at a faster rate than GDP. As a result, the share of hotels &
restaurants in GDP at current prices has increased from 1.2per cent in FY2000 to 1.5per cent in FY2005. In
constant (1999-2000) prices, the GDP from hotels and restaurants has increased from Rs. 222.65 billion in
FY2000 to Rs. 335.49 billion in FY2005. As a result, the share of hotels and restaurants in total GDP at constant
prices has increased from 1.24per cent in FY2000 to 1.40per cent in FY2005.
Hotels in India are broadly classified into 7 categories (five star deluxe, five-star, four star, three
star, two star, one-star and heritage hotels) by the Ministry of Tourism, Government of India,
based on the general features and facilities offered.
The ratings are reviewed every five years. As of December 2005 (latest available figure) there are
following number and category of hotels.
Star Category No. of Hotels No. of Rooms
5-Star Deluxe 82 18764 This table excludes
5 star 92 11332 hotels in the
4 star 132 9401
that have a significant
3 star 704 31039 presence across the
2 star 587 19031 country and cater
1 star 212 695 primarily to economy
Heritage 83 2216 tourists.
To be classified 50 5127
TOTAL 1934 103973
Source: Ministry of Tourism 08/MBA/17 SAPM
Premium and Luxury Segment
This segment comprises the high-end 5-star deluxe and 5-star hotels, which mainly cater to the business
and upmarket foreign leisure travellers and offer a high quality and range of services. The segment
accounted for 29% of the total hotel rooms in the country in December 2005.
This segment comprises 3 and 4 star hotels, which cater to the average foreign and domestic leisure
traveller. This segment also caters to the middle level business travellers since it offers most of the
essential services of luxury hotels without the high costs since the tax component of this segment is
lower compared with the premium segment.
These comprise 1 and 2 star hotels referred to as ‘Budget Hotels’. These categories do not offer as many
facilities as the other segments but provide inexpensive accommodation to the highly price-conscious
segment of the domestic and foreign leisure travellers.
In the past four decades, certain architecturally distinctive properties such as palaces and
forts, built prior to 1950, have been converted into hotels. The Ministry of Tourism has
classified these hotels as heritage hotels.
At any point in time, applications for classification are usually pending with the Ministry of
Tourism because of which such properties remain unclassified. The number of hotel rooms
pending classification has declined from historical 15-20per cent to 5per cent of the total
rooms available in the recent past.
The market for the hotel industry can be divided into the following key consumer segments
based on purpose of visit.
The Business Traveller: The Business Traveller is a businessman or a corporate executive
travelling for business purposes.
This segment includes corporates, both domestic and foreign, who open offices in the hotel
premises during start-ups, corporate executives who make extended stay either for long
duration projects or while waiting for permanent accommodation (primarily expatriates) and
While the senior executives usually stay in 5 star hotels, the middle level executives, who are
much larger in number, stay in the budget hotels.
This segment offers better realizations, as they demand relatively smaller discounts on room
rents (about 10per cent-15per cent), use more of facilities such as PCs, fax multi-media,
conference halls. Also, the Food & Beverage (F&B) revenues are better as they usually eat in
the hotel itself due to their busy schedules.
The Leisure Traveller: The Leisure Traveller could either be a foreigner or a domestic
traveller whose primary purpose of visit is holiday and site seeing. Among non-business
foreign tourists the primary motivation for visiting India is largely cultural attraction
followed by conferences and conventions, tourist attractions like beaches, wild life, hill
Usually, leisure travellers are part of a package run by a tour operator. The margins
offered by leisure travellers tend to be lower because of two reasons.
Firstly, they seek higher discounts and also provide less F&B revenues as they usually eat
And secondly the business offered by this segment is highly seasonal and tends to peak in
the September to March period.
Airline Cabin Crew: Airline Cabin Crew forms another important segment because of
the repetitive and guaranteed nature of the business that they provide. Usually, these are a
part of an annual contract whereby, in return for a fixed rate, a certain number of rooms are
provided on demand for cabin crews. With discount rates in the range of 40% and 50&, this
represents a low-yield segment for hotels in general.
International Tourist Traffic
The foreign tourist arrivals in India increased at CAGR of 5.5per cent from 2.29 million in
1996 to 3.92 million in 2005. Significantly, the bulk of international arrivals into India, both in
2004 and 2005, have been business travellers.
Main reason for this increase has been following fundamental factors:
India’s strong GDP growth.
Opening of sectors of the economy to private sector/ foreign investment. Strengthening
of ties with the developed world.
Reforms in aviation sector which led to better connectivity with many countries (such as
ASEAN) and created additional capacity on existing routes (for e.g. USA, Middle East). Also,
introduction of low cost airlines also contributed to the demand. The increase in
international flights, seat capacity and frequency into the country and the decision to
allow private airlines like Jet Airways and Air Sahara to fly overseas has had a positive
impact on tourist and business arrivals into India, by way of providing additional seats to
Development of infrastructure by the Government
India’s emergence as an outsourcing hub.
Success of “Incredible India” campaign and other tourism promotion measures.
YEAR 2008 2007 2006 2005 2004
FTA 5.37 5.08 4.45 3.92 3.48
2009 Foreign tourist arrivals dropped by 7% (till JULY 09, according to the tourism
ministry)and at the end by assuming further increase in FTA the final FTA at the end of 2009
will be assumed to be dropped by 6%. The drop in FTA is primarily due to
WORLD WIDE economic recession.
Mumbai Terrorist attacks.
From 2009 its assumed FTA will grow by 9% and 10% in the coming years visually 2010 and
2011. Year 2011 INDIA will host COMMONWEALTH games and ICC CRICKET world cup.
Taking the HOTEL industry SECTORIAL GDP contribution as one of the known existing x-values,
The FTA known values are existing y-values, and the new FTA value is predicted by using linear
So we get,
YEAR 2011 2010 2009
FTA 5.22 4.66 5.05
Please refer the excel sheet for more details 08/MBA/17 SAPM
According to estimates by HVS International, around 10,856 hotel rooms in Delhi, 9,318 rooms
in Mumbai, 7,794 rooms in Bangalore and 7,408 rooms in Hyderabad are expected to be added
Sahara To set-up 102 hotels in 3 & 4 star category, to USD 7.34-36.72 million per
Group be hotel depending on the size
located within the 217 Sahara cities planned and category
B & C grade cities
Viceroy To set up hotels in Chennai, Bangalore, Vizag USD 200 million
Hotels and add one more hotel in Hyderabad known as
MARRIOTT HYD with a management tie up with
UAE-based Tied up with Europe’s easy Hotel to set up a Initial investment of
Istithmar chain of USD 100 million
hotels budget-class hotels in India.
To set up its Golden Tulip brand of hotels in India. Golden
Tulip Southern Asia (GTSA), a Joint Venture between
Golden Tulip Hospitality Group and US-based Leyland Group,
Tulip Not known
plans to set up 50 hotels across 40 cities in the country on
both management contracts or franchisee system with the
owners of existing properties.
To float tenders for 13 sites for budget hotels on a Build-
IRCTC Not known
Operate-Transfer arrangement for 30 year periods.
Leela Palace & To open a hotel each in the next three years in Delhi, Estimated cost –
Resorts Hyderabad, Chennai, Pune and Udaipur. USD 340 million
To make large investments in the hospitality sector and has
already acquired 24 sites across the country with plans to
acquire 15 more sites.
DLF Universal DLF acquires the 5.54-acre Calcutta Metropolitan Corporation USD 2 billion
plot in Kolkata. It plans to build a 16- storey five-star deluxe
hotel on the plot in partnership with Hilton International.
It tied up with Hilton to develop 100 hotels in the country.
They comprise major players including Indian Hotels Company Limited (the Taj Group) and
associate companies, EIH Limited (the Oberoi Group), ITC Hotels Limited (the ITC
Welcome Group), Indian Tourism Development Corporation (ITDC) and Hotel
Corporation of India (HCI) (the latter two being under the Public Sector). Most of these
chains had an established presence in one or more metro cities prior to the tourism boom of
the 1980s. Subsequent to the tourism boom, these chains aggressively expanded their
presence in other locations. The private players among the hotel chains are industry leaders
and have well-established brand identities across the different industry segments.
They are companies that have come up after the tourism boom of the 1980s and 1990s. Due to
lack of prior experience in the hotel industry, these players have preferred to opt for
operating/management arrangements with international players of repute. Some of the
companies in this category are Hotel Leela Venture (with Kempinski), Asian Hotels (Hyatt
International Corporation), Bharat Hotels (formerly with Holiday Inn and Hilton and now with
Intercontinental). As late entrants, most of these hotel companies have fewer properties,
compared with the big chains. However most of these players have initiated expansion plans
during the late 1990s.
Public Sector Chains
ITDC and HCI, boast of some of the best locations in major cities but are relative under-
performers, as compared with their private sector counterparts.
International Hotel Chains
They are also looking at India as a major growth destination. These chains are establishing
themselves in the Indian market by entering into joint ventures with Indian partners or by
entering into management contracts or franchisee arrangements. Some of the players who
have already entered or plan to enter the Indian market include Marriott, Starwood,
Berggruen Hotels, Emaar MGF. Most of these chains have ambitious expansion plans
especially with a strong focus on the budget segment and tier II cities.
Localized Hotel Companies
They are mainly comprise early entrants who have an established localized presence and who
preferred not to expand during the tourism boom but focus on building and catering to a
loyal customer base.
The Indian Hotels Company and its subsidiaries are collectively known as Taj Hotels
Resorts and Palaces, recognised as one of Asia's largest and finest hotel company.
Incorporated by the founder of the Tata Group, Jamsetji N Tata, the company opened its
first property, The Taj Mahal Palace Hotel, Bombay, in 1903. The Taj, a symbol of
Indian hospitality, completed its centenary year in 2003. Taj Hotels Resorts and Palaces
comprises 59 hotels at
40 locations across India with an additional 17 international hotels in the Maldives,
Mauritius, Malaysia, United Kingdom, United States of America, Bhutan, Sri Lanka, Africa,
the Middle East and Australia.
The company has had a long-standing commitment to the continued development of the
Indian tourism and hospitality industry. From the 1970s through the 1990s, the Taj played
an important role in launching several of India's key tourist destinations. Working in tandem
with the Indian government, the Taj developed resorts and retreats while the government
developed roads and railways to India's hidden treasures.
Taj Hotels, Resorts and Palaces is an international hospitality group with strong roots in India. For over
100 years, it has built reputation on legendary properties, unparalleled facilities and impeccable service.
It operates in the luxury, premium, mid-market and value segments of the market through the following
Taj (luxury full-service hotels, resorts and palaces) is the flagship brand for the world’s most discerning
travellers seeking authentic experiences given that luxury is a way of life to which they are accustomed.
Spanning world-renowned landmarks, modern business hotels, idyllic beach resorts, authentic Rajput
palaces and rustic safari lodges, each Taj hotel reinterprets the tradition of hospitality in a refreshingly
modern way to create unique experiences and lifelong memories.
Taj also encompasses a unique set of iconic properties rooted in history and tradition that deliver truly
unforgettable experiences. A collection of outstanding properties with strong heritage as hotels or
palaces which offer something more than great physical product and exceptional service. This group is
defined by the emotional and unique equity of its iconic properties that are authentic, non- replicable
with great potential to create memories and stories.
Taj Exotica is resort and spa brand found in the most exotic and relaxing locales of the world. The
properties are defined by the privacy and intimacy they provide. The hotels are clearly differentiated by
their product philosophy and service design. They are cantered around high end accommodation,
intimacy and an environment that allows its guest unrivalled comfort and privacy. They are defined by a
a sensibility of intimate design and by their varied and eclectic culinary experiences, impeccable service
and authentic Indian Spa sanctuaries.
Taj Safaris are wildlife lodges that allow travellers to experience the unparalleled beauty of the Indian
jungle amidst luxurious surroundings. They offer India’s first and only wildlife luxury lodge circuit. Taj
Safaris provide guests with the ultimate, interpretive, wild life experience based on a proven sustainable
Premium Hotels (premium full-service hotels and resorts) provide a new generation of travellers a
contemporary and creative hospitality experience that matches their work-hard play-hard lifestyles. Stylish
interiors, innovative cuisine, hip bars, and a focus on technology set these properties apart.
The Gateway Hotel (upscale/mid-market full service hotels and resorts) is a pan-India network of hotels
and resorts that offers business and leisure travellers a hotel designed, keeping the modern nomad in
mind. At the Gateway Hotel, we believe in keeping things simple. This is why, our hotels are divided into 7
simple zones- Stay, Hangout, Meet, Work, Workout, Unwind and Explore.
As travel often means more hassle than harmony, more stress than satisfaction, modern travellers are
looking for smarter choices. Driven by the passion for perfection, the customers are welcomed to a
refreshingly enjoyable and hassle-free experience, anytime, everywhere. Offering the highest consistency
in quality, service and style we set new standards and take the unwanted surprises out of travelling.
Ginger (economy hotels) is IHCL’s revolutionary concept in hospitality for the value segment. Intelligently
designed facilities, consistency and affordability are hallmarks of this brand targeted at travellers who value
simplicity and self-service.
Considering India’s size and unparalleled diversity - natural, geographic, cultural and artistic, there is
vast room for growth in tourism industry. As travellers surge into India, the demand for rooms,
across segments, has skyrocketed. Hotels in the luxury and business traveller segment are
recording nearly 100 per cent occupancy, spiralling tariffs, and a strain on capacity and
manpower. Anticipating this demand, around 10,856 hotel rooms in Delhi,
9,318 rooms in Mumbai, 7,794 rooms in Bangalore and 7,408 rooms in Hyderabad are expected
to be added by 2011, according to estimates by HVS International.
The expected growth of the industry in future has provided its players with an opportunity to
invest in new technologies such as CRM tools and latest security systems, and to venture into niche
tourism segments like Medical, Religious, Cruise, Casinos, MICE etc. India can also develop
infrastructure to host international conferences and trade shows, thus increasing its share of
tourist traffic from such activities
India is gradually gathering popularity as a health tourist destination. At its current pace of
growth, healthcare tourism alone can rake over USD 1.7 billion additional revenues by 2012.
Medical tourism is now a USD 299 million industry, as about 100,000 patients come each year.
The country needs to exploit the cost advantage it can offer to a health tourist, the study said.
The biggest driver for healthcare tourism is the disparity in costs.
India’s poor domestic tourism infrastructure is leading to a threat of loosing foreign tourists to
other competing countries. India is highly prone to prevailing socio-economic and political
conditions. Like terrorist strikes, riots, epidemics, political uncertainty, slowdown in reforms etc.
The growth in the Indian tourism sector is accompanied by the imminent destruction of local
ecology and an increase in pollution, which, in the long run, is going to negatively impact the
tourism industry of India.
The biggest challenge in the Indian tourism sector is that of entry of new players, the country’s
growing economy has attracted a host of new players, the number of which is expected to
increase further. Aman Resorts, Shangri-la Hotels, Four Seasons Hotels and The Hilton group are
some of the international players that are at various stages of establishing presence in India.
As the number of player increases, the competitive intensity in the sector is likely to increase.
Remarkably, unlike earlier, many new entrants are reportedly considering entry into the mid-market
segment, which is currently dominated by non-chain properties.
The Indian Hospitality sector is expected to show a healthy growth in the medium term. Strong
economic growth, increased FDI, greater emphasis on tourism development, favorable
Government policies, impending 2010 Commonwealth games, 2011 Cricket World Cup and other
international events, will be the major drivers for the growth. There exists a lot of scope for
growth in tourism sector.
By 2020, the Government of India expects travel and tourism to contribute Rs 8,500 billion to
GDP, almost four times the value in 2005. With successive Governments committed to reform, a
strong manufacturing sector and a private sector that already has a critical mass that is needed to
drive growth, it is unlikely that the strong growth in GDP is likely to be reversed. The rising
middle class is also becoming increasingly affluent towards lifestyle change.
Major impediments to the growth are sensitivity to business cycles and adverse political and social
events (including terrorist attacks), high rate of tax, high land price, bureaucracy, and poor
infrastructure. For instance, the effective rate of taxation on tourism in India is 21 per cent as
compared to 7 per cent in Thailand, 4 per cent in Malaysia and 1 per cent in Hong Kong.
Furthermore, owing to high land prices, there are more five star hotels than budget hotels,
making India a high cost deluxe destination. Additionally, India still does not have facility of
modernised e-visa. The existing visa process is cumbersome and comparatively more expensive
than other destinations. Yields are expected to be low in coming years on account of continuing
price-cutting and discounts. 08/MBA/17 SAPM
MACD, Parabolic SAR and the various moving averages are a few examples of trend indicators and they can all be
used to identify a trend. It's widely argued that you should only trade with the trend so all of these indicators will help
you to take the decision out of your hands, and therefore dictate which way you should be trading.
These types of indicators are essentially oscillating indicators and are most useful for determining overbought and
oversold positions and can be very useful in signalling the start of a new trend. Examples include RSI, Stochastic
As the name suggests, these types of indicators show the volume of trades behind a particular price movement which
can be extremely beneficial because a price movement backed up by high volume is a much stronger signal than a price
movement based on low volume.
Examples here include Chaikin Money Flow, Force Index,
Money Flow Index and Ease Of Movement.
Volatility indicators generally use ranges to show the behaviour of the price and the
volume behind any movements. This is useful because any dramatic change in
behaviour can provide a good entry signal. Common examples include
Bollinger Bands, Average True Range and Envelopes.
Candlestick charts are said to have been developed in the 18th century by legendary Japanese rice
trader HOMMA MUNEHISA.
Candlesticks provide unique visual cues that make reading price action easier.
Trading with Japanese Candle Charts allow speculators to better comprehend market sentiment.
Offering a greater depth of information than traditional bar charts - where the high and low are
emphasized - candlesticks give emphasis to the relationship between close price and open price.
Traders who use candlesticks may more quickly identify different types of price action that tend to
predict reversals or continuations in trends - one of the most difficult aspects of trading.
Furthermore, combined with other technical analysis tools, candlestick pattern analysis can be a
very useful way to select entry and exit points.
The body of a candlestick illustrates the difference
between the open and closing price.
Its colour (in this case,
RED FOR DOWN &BLUE FOR UP)
shows whether the day's (or week's or year's)
market closed up or down.
The wicks (or shadows) point out the
extreme low and the extreme high price
for the currency that day. 08/MBA/17 SAPM
THE INDIAN HOTEL COMPANY LIMITED (MONTHLY DATA YEAR 05-09)
Developed by GERALD APPEL, MACD is one of the simplest and most reliable
indicators available. MACD uses moving averages, which are lagging indicators, to
include some trend-following characteristics.
These lagging indicators are turned into a momentum oscillator by subtracting the
longer moving average from the shorter moving average. The resulting plot forms a
line that oscillates above and below zero, without any upper or lower limits.
The most popular formula for the MACD is the difference between a security's
26-day and 12-day Exponential Moving Averages(EMAs).
Of the two moving averages that make up MACD, the 12-day EMA is the faster and
the 26-day EMA is the slower.
Closing prices are used to form the moving averages. Usually, a 9-day EMA of
MACD is plotted along side to act as a trigger line.
A BULLISH CROSSOVER occurs when MACD moves above its 9-day EMA, and
A BEARISH CROSSOVER occurs when MACD moves below its 9-day EMA.
MACD is a trend following indicator, and is designed to identify trend changes. It's generally not
recommended for use in ranging market conditions. Three types of trading signals are generated,
* MACD line crossing the signal line.
* MACD line crossing zero
* Divergence between price and MACD levels
The signal line crossing is the usual trading rule. This is to buy when the MACD crosses up through the
signal line, or sell when it crosses down through the signal line.
When the MACD line crosses through zero on the histogram it is said that the MACD line has crossed the
The histogram can also help visualizing when the two lines are coming together.
A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish.
Positive divergence between MACD and price arises when price makes a new selloff low, but the MACD
doesn't make a new low(i.e. it remains above where it fell to on that previous price low). This is
bullish, suggesting the downtrend may be nearly over.
Negative divergence is when price makes a new rally high, but MACD doesn't rise as high as before, this
For 12 day EMA, We have to calculate 11-day Simple moving average (SMA).
EMA formula = price today * k + EMA yesterday's * (1-k) where N is number of days in EMA
X = Current EMA,
C = Current Price,
P = Previous period's EMA*,
K = Smoothing constant
(*A SMA is used for first period's calculation),K = 2/(1+N),N = Number of periods for EMA
K = 2/(1+N)
we have to calculate 25-day Simple moving average (SMA)
MACD[FAST LINE]= Subtract 26-day EMA from 12-day EMA.
9-day EMA [Slow Line]) = first we have to calculate 9-Day EMA of MACD(trigger/signal line)
calculate 8-day Simple moving average (SMA).
K = 2/(1+N), so 2/(9+1)=0.2 08/MBA/17 SAPM
MACD FAST LINE
SELL SIGNAL SLOW LINE
15.0000 Or 9DAY EMA
YEAR 2004 (BULLISH & BEARISH CROSS OVERS)
SENSEX 2004 DAILY 08/MBA/17 SAPM
Developed by J. WELLES WILDER,
Relative Strength Index (RSI) is an extremely useful and popular momentum oscillator.
The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses
and turns that information into a number that ranges from 0 to 100.
It takes a single parameter, the number of time periods to use in the calculation. In his
book, Wilder recommends using 14 periods.
RSI = 100 –[100/( 1 + RS )]
RS(Relative Strength) = Average Gain / Average Loss
Wilder recommended using 70 and 30 and overbought and oversold levels respectively.
Generally, if the RSI rises above 30 it is considered bullish for the underlying stock.
Conversely, if the RSI falls below 70, it is a bearish signal. Some traders identify the long-term
trend and then use extreme readings for entry points.
If the long-term trend is bullish, then oversold readings could mark potential entry points
For calculation of RSI , a condition is put ahead of the normal average gain or average
Because if average loss then RS cannot be calculated as division by zero is not
In case of calculation of RSI, when average loss is 0 then RSI is supposed to be 100
When average loss is zero then value of RS becomes 100000
This value of 100000 is not unique, it can be any number large enough for the data
such that RSI becomes 100 when average loss is 0. Thus 100000 is a sort of
replacement instead of writing infinite which actually should have been the case
Analysts consider that a buying signal occurs when the %K line crosses and rises above the %D
line. Conversely, a cross-over where the %K line drops below the %D is believed to be a sell sign.
If either the %K or %D fall below 20 and then starts to rise again above 20, this may be
considered a buy sign. Similarly, a selling signal is thought to occur if the indicator rises above 80
and then begins to fall below 80.
Divergences are also considered to be a buy signal, although may be more difficult to identify.
If the price is making a lower low, but the stochastic is making a higher low, some may consider
this to be a buy signal, and vice-versa.
%K = [( Today's Close - LL ) / ( HH - LL )] * 100
LL = Lowest Low price in Period K
HH = Highest High price in Period K
%D is calculated as a Moving Average of %K for Period D.
%D smoothens the %K line
TECHNICAL ANALYSIS FOCUSES ON PRICE MOVEMENT.
The primary focus of technical analysis is on the movement of prices. Charts show
how prices are moving (or not moving), when prices are trending, and the strength
of those trends. Volume, oscillators and momentum give a clearer picture of market
action. And this information can be obtained at a glance.
TRENDS ARE EASILY FOUND.
Trends are critical to technicians because a currency is likely to continue moving in
the direction of the trend. Charts show them clearly and quickly.
PATTERNS ARE EASILY IDENTIFIED
Head-and-shoulders patterns, rounding tops and bottoms, ascending and descending
triangles, and double and triple tops are proven patterns that many currency prices
will follow. Hence, they have strong predictive powers. They can be impossible to
detect without using a chart.
CHARTING IS QUICK AND INEXPENSIVE.
Technical analysis is less time consuming and less costly than fundamental analysis.
It can be performed at no time.
CHARTS PROVIDE A WEALTH OF INFORMATION.
Charts can provide only the most basic information on a trend or support and
resistance. However, they go much deeper to provide information on the strength of
a trend. 08/MBA/17 SAPM
Indian Hotels Company Ltd. (IHCL) succumbed to the pressures emanating from the declining tourist inflows
and the consequent plunge in occupancy rates and average room rates (ARRs) in Q1’10. As a result, its
standalone revenue declined 30.4% during the period. At the same time, the EBITDA margin also plunged to
4.6%. While it’s expected a weakness in ARRs to continue, the improvement in the occupancy levels in the
coming quarters coupled with the new capacity addition will help the Company to maintain its top-line growth.
Accordingly, we have revised our target price to Rs. 90 and upgraded our rating to Buy from Sell.
Likely improvement in occupancies: Tourist arrivals in June 2009 and July 2009 witnessed a marginal
growth of 0.2% and 0.7%, respectively. This trend is likely to continue in the rest of the financial year on the
back of the festive season and an expected increase in business tourists due to the improving macroeconomic
outlook. Occupancies is expected to improve to 70% in FY10; however, ARRs are likely to be under pressure in
FY10 owing to the addition of new capacity coupled with lower demand.
EBITDA margin expected to increase slightly: The hotel business is a high fixed-cost business.
Thus, industry down-cycles have been seen to result in sharp declines in the operating margins.
IHCL has continued to move forward with its expansion plans, although with
some deferments in a few projects. The Company has added 468 new rooms
(including management contracts) in the current financial year, and another
1326 new rooms will be added to the inventory by the end of this financial year.
HOTEL ROOMS EXPECTED SHARE HOLDING PATTERN
60 Hyderabad Dec 2009
IHCL Promoters 30
Taj Falaknuma Palace 331 Yeshwantpur Feb 2010
TAJ GROUP FIIs 15
(Taj International SA) 172-Cape Town Dec 2009 Institutions 25
(Oriental Hotels Ltd) 64-Chennai Oct 2009
(Roots Corporation Ltd.) 468-Ginger hotels – 5 cities Ongoing Public & 30
Gateway, OMR 159 Chennai Jan 2010
i Vivanta by Taj 72 Bekal March 2010 08/MBA/17 SAPM
Sept 08 to Sept 09 monthly data
OTHER EXP 6%
RAW MATERIAL CONSUMP
FUEL,POWER & LIGHT
According to the economic survey the GDP (real growth rate) for the year 2010 and 2011 are
expected to be 7.15% and 8% respectively
The SECTOR (Trade, hotel, transport & storage) contribution ratio wrt the total GDP is predicted
for the years by using liner regression.
Income is predicted for year 2010 and 2011 taking the past INCOME as the known existing x-
The FTA (Foreign tourist arrivals) known values are existing y-values,
and the new INCOME value is predicted by using linear regression.
This is because FTA is directly related with INCOME of IHCL
Variable cost with INCOME (Sales) ratio is 14% (average) from 2004 to 2009
This is used to predict the Variable cost of the year 2010 and 2011
Fixed cost according to the trend from the year 2004 to 2009 is 50% (average) of INCOME.
This proves the fact that HOTEL industries primarily involves high FIXED costs.
ASSUMPTIONS 2009 2010 2011
Depreciation 9% 9% 9%
Interest 10% 10% 10%
Tax Charges 35% 35% 35% 08/MBA/17 SAPM
Monthly data are taken of three stock prices of IHCL SBI & SAIL from October 2004 till
It is summation of Weight age Return of the stocks (W1*R1+W2*R2+W3*R3)
It is Variance or Standard deviation of portfolio. Variance -Covariance Matrix
PORTFOLIO VARIANCE =(W12 V1 )+(W22 V2 )+(W32 V3 )+2(W1W2Cov12)+2(W2W3Cov23)+2(W1W3Cov13 )
W1 W2 W3
IHCL SBI SAIL
V1 Cov12 Cov13
Cov12 V2 Cov23
Some tables Cov13displayed23 this document partially, for details please view the
SAIL are Cov in V3
sheet. 08/MBA/17 SAPM
From the matrix we can see that with assigning various weights we are getting
the MAXIMUM PORT FOLIO RETURN of 20%
when we give weight 1 to SBI, weight 0 to IHCL, weight 0 to SAIL with
PORTFOLIO VARIANCE 243436.917
From the matrix we can see that with assigning various weights we are getting
the PORTFOLIO RETURN of 11 %
with MINIMUM PORTFOLIO VARIANCE of 8019.15 by assigning weight 1 to
IHCL, weight 0 to SBI and 0 to SAIL.
Tables are displayed in this document partially, for details please view the excel
sheet. 08/MBA/17 SAPM
WEIGTHS WEIGHTS WEIGHTS AVERAGE YEARLY AVERAGE YEARLY AVERAGE YEARLY PORTFOLIO PORTFOLIO
IHCL SBI SAIL RETURN IHCL RETURN SBI RETURN SAIL RETURN % RISK (STDV)
0 0 1 -1.75 0.20 0.11 10.65 0.02 0.15
0 1 0 -1.75 0.20 0.11 19.92 0.02 0.14
INTERPRETITION from GRAPH & TABLE
Combination with minimum and maximum risk the weight age of three different
We can see that the weight age of IHCL is taken as ZERO because of its negative
The portfolio returns ranges from 11% to 20% approx with high RISK associated
with high RETURN.
The point of effective portfolio return is the point where the RISK free return rate
(9%) is tangent to the CURVE. Where a return of 15% is achieved.