Report Contents:

Sl. No Title Page No

1 Objective 3

2 Financial Statement analysis 3

3 Hospitality Sector India 3

4 About the Company 4

5 Financial Ratio Calculations 5

5.1 Overall performance measures 6

5.2 Profitability measures 8

5.3 Test of investment utilization 8

5.4 Tests of financial Condition 12

5.5 Test of dividends 14

6 Horizontal analysis 14

7 Vertical analysis 16

8 Observations 17

9 Conclusion 18

10 Appendix 20

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1.Objective:
Demonstrate a comparative analysis of financial performance between two hospitality chains that
helps Lenders and Investors to make decisions.

2.Financial Statement Analysis:

For any business, corporate finances are one of the key resources which are limited, and analysis
needs to be carried out to determine how the company should allocate its funds. Financial
statement analysis is this process of reviewing a company’s statements in the context of its
industry and economic environment in order to arrive at a decision or recommendation. Both
Internal and External stakeholders use it to understand the overall health of the organization and
its business value. Three key financial statements used for the analysis are – Income statement,
Balance sheet and statement of cash flows. Companies use these statements to manage the
operations of their business and to provide reporting transparency to their stakeholders.
The most common methods of financial statement analysis include:
1. Horizontal analysis - a two-year comparison of analysis of the financial statements and its
elements

2. Vertical analysis – a technique in which every line items of the financial statements are
listed as percentages, based on a figure within the financial statement.

3. Ratio analysis - used to identify performance metrics in each statement and bring together
data points across statements collectively. They are classified into Overall Performance
measures, Profitability measures, Tests of financial condition and Tests of investment
utilization and tests of dividend policy.

3.Hospitality Sector in India:

India, known for its ancient tradition of Atithi Devo Bhava or ‘guest is god’ has been hosting
foreigners for ages. From Kashmir to Kanyakumari and from Guhar Moti to Kibithu, the country
offers an immense opportunity to the hospitality industry. From beautiful snow-capped mountains
to desserts, from plateaus to ocean beaches, the hospitality industry in India is indeed an enriched
one.

• India’s hospitality sector falls within the spectrum of travel and tourism

• Estimated to contribute 9.2% of India’s GDP and 8.0% of the total employment

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 • Hotel Industry is sensitive to economic cycles and faces its troughs & highs based on supply
and demand for rooms at any point

Investing in the hospitality industry requires adoption of series of complex business decisions. It
requires high initial investments in fixed assets, well structures so that they result in a high return
on investment over the medium term.

4. About the Company

Both the organizations mentioned fall under the same category according to the regulations on
categorization and are oriented towards the same or similar target market segments.

4.1 Hotel Leela Venture Limited (HLV)

• The Leela Palaces, Hotels and Resorts, commonly known
as The Leela, is an Indian luxury hotel chain, founded in
1986 by C. P. Krishnan Nair, and owned by The Leela Group.

• Currently, The Leela Palaces, Hotels and Resorts owns and

operates five properties and the others are managed.

4.2 Indian Hotels Company Limited (IHCL)

Incorporated in 1902 by Jamshed N Tata of the Tata Group:

• India’s largest hospitality company and among South

Asia’s largest hospitality companies by market
capitalization
• IHCL’s brands span across four distinct business
segments – Luxury(Taj/ Exotica), Upper Upscale (Vivanta), Upscale(Gateway) and
economy/budget(Ginger)
• Other businesses and joint ventures include – Taj Salon, Taj Khazana, Taj Air, Taj Yachts,
Inditravel (subsidiary), Taj Sats Air Catering (JV) and Roots Corporation

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5. Financial Ratios Calculations
Data Table for reference
Hotel Leela Venture (In lakhs) Mar-19 IHCL Venture ( in crores) Mar-19
Assets Assets
Property, plant and equipment 26983.91 Property, Plant and Equipment 5233.18
Total non-current assets 42184.07 Total non-current assets 8424.98
Inventories 784.54 Inventories 80.40
Cash and cash equivalents 2899.10 Cash and cash equivalents 189.29
Trade receivables 6537.66 Trade receivables 321.38
Total current assets 11626.87 Total current assets 1158.78
Total assets 418876.93 Total assets 9583.76
Total Equity 26547.81 Total equity 5147.86
Liability Liability
Total non-current liabilities 72687.28 Total non-current liabilities 2346.44
Total current liabilities 303785.13 Total current liabilities 2089.46
Total liabilities 376472.41 Total liabilities 4435.90
Total equity and liabilities 418876.93 Total equity and liabilities 9583.76
Profit and Loss Mar-19 Profit and Loss Mar-19
Revenue from operations 15434.43 Revenue from operations 4512.00
Total income (revenue) 15852.79 Total income (revenue) 4595.38
Food and beverages consumed 1330.32 Food and beverages consumed 404.05
Finance costs 39.66 Finance costs 190.13
Total Expenses 16666.31 Total expenses 4200.25
Pre tax Profit/loss -813.52 Pre tax Profit/loss 395.13
Depreciation and amortisation expenses 957.52 Depreciation and amortisation expenses 327.85
Profit after Tax -11892.96 Profit After tax 296.12
No of shares 630551766.00 No of shares 1189258445.0
dividend 0.00 dividend 0.50
Cash flow Mar-19 Cash flow Mar-19
Cash generated from operating activities 814.75 Cash Generated from O perating A ctivities 908.69
Net cash flow from continued and
discontinued activities 20938.36 Net Cash Generated F rom Operating Activities 711.43

Ratio Analysis:
Ratios enable the comparison of firms that differ in size and compare an organization’s financial
performance with the industry averages. Additionally, ratios are used in the form of trend analysis
for identifying the areas within an organization where performance has deteriorated or improved
over time. Calculations of IHCL and HLV ratios are follows:

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5.1 Overall Performance Measures
Price/earnings ratio
Market price per share / Net income per share

Net income per share = Profit for the year / number of shares
Indian = 286.82*10000000 (in cr.) / 1189258445 = 2.411
Leela = - 11892.96*100000 (in lakhs.) / 630551766 = - 1.886
Market price per share as on 29th April 2020, Indian: Rs. 75 and HLV = Rs. 4
Substituting the values,

Indian Hotels Hotel Leela

75 / 2.411 4 / (-1.886)
31.1 - 2.12

A higher PE for Indian Hotels means that the same share of company’s profits will cost a
prospective shareholder more, an indication of higher earnings growth than Leela Hotels. In above
case for Indian Hotels, it indicates that investors are willing to pay a price of 31.1 times than that
of share’s net income and for Leela, the negative P/E ratio indicates that the stock has negative
earnings.

Return on assets: (Net income + Interest (1 – tax rate)) / Total assets

Tax rate as applicable: Indian = 34.94%

Leela = N/A, as the company is operating at a loss (total expenses exceeds total income),
no tax is levied as per normal provisions of Income Tax Act.

Indian Hotels Hotel Leela

296.12 + 190.13 (1-0.3494) / 9583.76 -11892.96 + 39.66 (1) / 418876.93
4.38 % - 2.83%

The return on assets ratio measures how effectively a company can earn a return on its
investment in assets. In other words, ROA shows how efficiently a company can convert the money
used to purchase assets into net income or profits. 4.38% ROA shows that Indian Hotels is making
wise decisions in investing the assets as the returns are high when compared to poor asset
utilization of Leela.

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Return on Invested Capital: (Net income + Interest (1 – tax rate)) / (long term liabilities –
Shareholders’ equity)
Tax rate as applicable: Indian = 34.94%
Leela = N/A, as the company is operating at a loss (total expenses exceeds total income),
no tax is levied as per normal provisions of Income Tax Act.

Indian Hotels Hotel Leela

296.12 + 190.13 (1-0.3494) / 2346.44 + -11892.96 + 39.66 (1) / 72687.28 +
5147.86 (in cr.) 26547.81 (in lakhs.)
5.72% -11.94%

The return on invested capital ratio gives a sense of how well a company is using its money
to generate returns. It measures the percentage return that a company earns on invested capital.
-11.94% of ROIC shows that the invested funds are not being utilized effectively, in fact leading to
a loss of funds. Hence the investors might not continue to invest the funds here. Vice-versa in case
of Indian Hotels which has ROIC greater than 5% indicating that the company is creating value.

Return on Shareholders’ Equity: Net Income / Shareholders’ equity

Indian Hotels Hotel Leela

296.12*100 / 5147.86 (in cr.) - 11892.89*100 / 26547.81 (in lakhs.)
5.75 % - 44.79%

ROE is considered a measure of how effectively management is using a company’s assets

to create profits. Return on equity (ROE) is a measure of profitability that calculates how many
rupees of profit a company generates with each rupee of shareholders' equity. IHCL has a ROE of
5.75% indicating profit creation of 5% for every 1rupee of shareholders' equity during the year by
investing in subsidiaries. HLV’s negative ROE means that its shareholders are losing, rather than
gaining value.

5.2 Profitability Measures

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Profit margin: Net income / Net sales

Indian Hotels Hotel Leela

296.12*100 / 4512 (in cr.) -11892.96*100 / 15434.43 (in lakhs.)
6.56% -77.05 %

Indian Hotels managed to generate a profit margin of 6.56% after all their expenses taking
into consideration fluctuating demands that industry faces throughout the year. Hotel Leela is
having a negative margin on 77% which translates that business is struggling to manage expenses
and failing to achieve good sales and poor cost management.

Earnings per share: Net income / number of shares outstanding

Indian Hotels Hotel Leela

296.12 / 1189258445 (in cr.) -11892.96 / 630551766 (in lakhs.)
Rs. 2.48 Rs. – 1.88

Earnings per share also called as net income per share measures the amount of net income
earned per share of stock outstanding. Higher earnings per share is always better which shows
that the company is profitable. Indian hotels having higher number of shares still manages to have
an EPS of Rs.2.45 whereas Hotel Leela running in loss have an EPS of Rs. -1.88 which can often lead
to reduction of stock price of the company.

5.3 Tests of Investment Utilization

Asset turnover: Sales revenue /Total assets

Indian Hotels Hotel Leela

4595.38/ 9583.76 (in cr.) 15434.43 / 418876.93 (in lakhs.)
0.48 0.037

Asset turnover ratio depicts how well the company’s assets are utilized to generate sales.
The higher the asset turnover ratio, the better. Indian Hotels ATR of 0.48 indicates that for every
rupee in company’s assets, IHCL generates 0.48 rupees in sales. Hotel Leela’s ratio of 0.037
indicates their asset utilization is low.

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Invested Capital turnover: Sales revenue / (Long-term liabilities + Shareholder’s equity)

Indian Hotels Hotel Leela

4595.38/ (5147.86+2346.44) (in cr.) 15434.43 / (72687.28+26547.81) (in lakhs.)
0.61 0.16

Invested capital turnover ratio helps to understand how a company uses its investment to
generate revenue. Indian hotels have a higher Invested capital ratio compared to Leela hotels.
Leela hotels have higher long-term liabilities compared to the revenue generated.

Capital intensity: Sales Revenue / Property, plant and equipment

Indian Hotels Hotel Leela

4512 / 5233.18 (in cr.) 15434.43 / 26983.91 (in lakhs.)
0.86 0.57

Capital intensity or Fixed asset turnover (FAT) ratio indicates how well the business is using its fixed
assets to generate sales. Indian hotels FAT of 0.86 indicates that there is greater efficiency in
regard to managing fixed assets; therefore, it gives higher returns on asset investments. Lower
ratio of Hotel Leela suggests that the company is over-investing in its fixed assets.
Day's cash: Cash/ (Cash Expense/365)

Indian Hotels Hotel Leela

14189.29/ (4200.25 -327.85 /365) (in cr.) 2899.1/ (16666.31 -957.52 /365) (in lakhs.)
1337.4 days 67.3 days

Day’s cash on hand ratio is the number of days that an organization can continue to pay its
operating expenses, given the amount of cash available. As seen above, Indian hotels has a high
value indicating they can pay its operating expenses for 1337 days with the cash on hand while
Hotel Leela can only last 67 days.

Day's receivables: Account Receivables / (Sales/365)

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 Indian Hotels Hotel Leela
321.38/ (4512 /365) (in cr.) 6537.66/ (15434.43 /365) (in lakhs.)
25.9 days 154.6 days

For Indian hotel, customers on average take 25 days to pay their receivables. If the company had
a 30-day payment policy for its customers, the average accounts receivable turnover shows that
on average customers are paying one day late. High ratio of Hotel Leela indicates the company has
poor collection procedures and customers who are unable or unwilling to pay for their purchases.
The point of the measurement is to determine the effectiveness of a company's credit and
collection efforts in allowing credit to reputable customers, as well as its ability to collect cash from
them in a timely manner.

Day's inventory: Inventory/ (Cost of Sales/365)

Indian Hotels Hotel Leela

80.4/ (404.05/365) (in cr.) 784.54/ (1330.32/365) (in lakhs.)
72.6 days 215.2 days

A low day’s inventory outstanding indicates that a company is able to more quickly turn its
inventory into sales. A high day’s inventory outstanding indicates that a company is not able to
quickly turn its inventory into sales. As you can see, Indian Hotel is 72 days. This means Indian
Hotel has enough inventories to last the next 72 days or Indian hotel will turn his inventory into
cash in the next 72 days. Depending on industry, this length of time might be short or long. Shorter
days inventory outstanding means the company can convert its inventory into cash sooner. In
other words, the inventory is extremely liquid.

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Working capital turnover: Sales Revenue / Working Capital

Indian Hotels Hotel Leela

4512.00/ (1158.78-2089.46) (in cr.) 15434.43 / (11626.87-303785.13) (in lakhs.)
-4.84 -0.05

Working Capital Turnover Ratio helps in determining that how efficiently the company is using its
working capital (current assets – current liabilities) in the business. Higher positive number of
WCTR indicates that the company is generating more revenue with its working capital.
Since both have negative ratios it can be interpreted that both the companies are not good in
generating revenues using working capital and since both are in hospitality sector where most of
the revenue will come from Fixed asset than Working capital. But If you compare 2019 and 2018
ratios of both, we can say that Indian Hotels has fared well (20% change in 2019) in generating
revenues from working capital whereas Leela has negligible change in WCTR.

Current ratio: Current Asset / Current Liability

Indian Hotels Hotel Leela

1158.78/2089.46(in cr.) 11626.87/ 303785.13 (in
lakhs.)
0.55 0.03

Current ratio is a measure used to evaluate short-term solvency position of a company.

But the ratio does not disclose the true liquidity of the business because a high current ratio may
not indicate the nature of its current assets. In this instance, Indian Hotels has a higher CR of 0.55
compared to 0.03 of Hotel Leela. By comparing the nature of current asset of both we understand
that Indian Hotels has most of CA in form of receivables and cash whereas Leela has high
inventories which are not quickly convertible into cash.

Current assets HLV IHCL

(as on MARCH 31,2019) (in lakhs) (in Crores)
Inventories 10 784.54 80
Trade receivables 11 6,537.66 321.38
Cash and cash equivalents 12 2,899.10 189.29
Other financial assets 14 213.95 160.14
Other current assets 15 1,191.62 137

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Acid test (quick) ratio: Monetary Current Asset / Current Liability

Indian Hotels Hotel Leela

(1158.78-80.40)/ 2089.46 (in cr.) (11626.87-784.54)/ 303785.13 (in lakhs.)
0.516 0.035

The acid-test ratio is used to indicate a company’s ability to pay off its current liabilities without
relying on the sale of inventory or on obtaining additional financing. Higher the QR, the company
has higher quick assets to pay for its current liabilities. Creditors will be in favor of Indian hotels
because for each rupee of current liability, it has 0.5 rupees of quick assets to pay for it whereas
Leela is able to pay 0.03 rupees only.

5.4 Tests of financial Condition 

Financial Leverage Ratio: Assets / Shareholder’s equity

 
Indian Hotels Hotel Leela
9583.76/5147.86(in cr.)  418876.93/26547.81(in lakhs.) 
1.87 15.78
 
Financial leverage or asset to equity ratio reveals the proportion of an entity’s assets that has been
funded by shareholders. Indian hotels low ratio of 1.87 indicates that it has been financed in a
conservative manner, with a large proportion of investor funding and a small amount of debt.
Hotel Leela indicates that they have funded most of their assets with debt and lenders are unlikely
to extend additional credit in this position.

 
Debt to Equity ratio: Long-term Liabilities / Shareholders’ equity
   
Indian Hotels Hotel Leela  
2346.44 / 5147.86(in cr.)  72687.28/26547.81 (in lakhs.)
45 % 274. 7 %
 
Debt to equity ratio shows a company's debt as a percentage of its shareholder’s equity. If the
debt to equity ratio is less than 1.0 or (100%), it shows that long term debt is less than equity.

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Indian Hotels ratio indicates that the company is less levered and closer to being fully equity
financed while Hotel Leela ratio means that the company will find it difficult to service its debt.

 
Debt/capitalization ratio: Long-term liabilities / (Long-term liabilities + Shareholders’ equity)

Indian Hotels Hotel Leela

2346.44 / (2346.44+5147.86) (in cr.) 72687.28 / (72687.28+26547.81) 
31.3 % 73.24 %
 
Debt to capital ratio measures the proportion of debt a company uses to finance its operations as
compared with its capital. In above case, both Indian Hotels and Hotel Leela have its Debt to Capital
ratio below 1 signifying that the company’s debt levels are manageable but the lenders and
shareholders of Hotel Leela are at a higher risk when compared to IHCL.

Times Interest earned: (Pretax operating profit + Interest) / Interest 

Indian Hotels Hotel Leela

(395.13+190.13)/190.13 (in cr.)  (-813.52+39.66) /39.66 (in lakhs.) 
3.07 -19.51

This ratio analyses how well a company can cover its interest payments on pretax basis. Higher
ratio states that the company is more capable in paying interest on its debt. Hotel Leela’s negative
ratio indicates that the company may face difficulties to pay its interest obligation.
 
Cash flow/debt ratio: Cash generated operations / Total debt
   
Indian Hotels Hotel Leela
711.43/4435.9  20938.36/376472.41 
16 % 5.56 %
 
The cash flow to debt ratio is a coverage ratio that compares the cash flow that a business
generates to its total debt. Indian hotels high cash flow to debt ratio shows the company is in a
good financial position and can boost debt repayments if required. In comparison, Hotel Leela’s
ratio of 5.5% means that the company could be at a higher risk of not paying interest payments
and has a relatively smaller financial base. 

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5.5 Tests of Dividend

Dividend Yield Ratio

Indian Hotels Hotel Leela

0.50/75 (in rupees) --
0.0066 or 0.66 % 0

It shows the relationship between cash dividends and market price. Compared to Leela, Indian
hotels is doing better as no dividends has been paid for past few years due to its financial condition.

Dividend payout Ratio

Indian Hotels Hotel Leela

(1189258445.0 * 0.50) / (296.2 * 10000000) --
0.2 0

For Hotel Leela - In view of losses, the Directors do not recommend any dividend for the
financial year ended 31st March 2019.

For Indian Hotels, the dividend yield ratio is 0.66% means an investor would earn 0.66% on his /
her investment in the form of dividends if the investor buys the company’s share at current market
price. An investor should prefer Indian Hotels because its dividend yield ratio is higher than that
of Leela. Indian is an old and well-established company with a stable dividend distribution history.
Also, there are good chances of appreciation in the market value of the stock of Indian. Because
of these reasons, Indian Hotels is a more reliable and less risky company for investment portfolio
as compared to Leela.

6. Horizontal Analysis
Horizontal analysis of income statement will help us in understanding the year-over-year (YoY)
change in each line item. Horizontal analysis is a great way to identify trends and growth patterns
of a company. Horizontal analysis not only improves the review of a company's consistency over
time directly, but it also improves comparability of growth in a company to that of its competitors
as well.

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 Horizontal Analysis (YOY in %)
2019 2018 2017 2019 2018
HLV Ltd Rs. in lakhs
Revenue from operations 15434.43 13,783.52 69,994.38 11.98% -80.31%
Other income 418.36 645.28 1,385.15 -35.17% -53.41%
Total income 15,852.79 14,428.80 71,379.53 9.87% -79.79%
Food and beverages consumed 1,330.32 1,189.86 6163.62 11.80% -80.70%
Employee benefit expenses and payment to contractors 6,042.82 5,809.83 19,758.05 4.01% -70.60%
Finance costs 39.66 12.7 9,044.20 212.28% -99.86%
Depreciation and amortisation expenses 957.52 1,326.08 20,231.98 -27.79% -93.45%
Other expenses 8,295.99 7,981.53 26,432.19 3.94% -69.80%
Total Expenses 16666.31 16,320.00 81,630.04 2.12% -80.01%
Profit/(loss) before exceptional items and Tax -813.52 -1,891.20 -10,250.51 56.98% 81.55%
Exceptional items - Profit/(loss) (net) -2966.11 -3,293.68 - 9.95%
Profit/(loss) before Tax -3779.63 -5,184.88 -10,250.51 27.10% 49.42%
Tax expense - - 0.80
Profit/(loss) after Tax from continued operations -3779.63 -5,184.88 -10,250.59 27.10% 49.42%
Profit/(loss) after Tax from discontinued operations -8113.33 2,863.23 -383.36%
Profit after Tax (A + B) -11892.96 -2,321.65 -10,250.59 -412.26% 77.35%
IHCL
Income Rs. in crores
Revenue from operations 4512 4,103.55 4020.57 9.95% 2.06%
Other income 83.38 61.73 54.94 35.07% 12.36%
Total income 4595.38 4,165.28 4075.51 10.33% 2.20%
Food and beverages consumed 404.05 376.44 363.95 7.33% 3.43%
Employee benefit expense and payment to contractors 1,470.79 1,346.62 1364.65 9.22% -1.32%
Finance costs 190.13 269.04 323.83 -29.33% -16.92%
Depreciation and amortisation expenses 327.85 301.2 299.37 8.85% 0.61%
Other operating and general expenses 1,807.43 1682.35 1,710.14 7.43% -1.63%
Total expenses 4200.25 4,003.44 4034.15 4.92% -0.76%
Profit before exceptional items 395.13 161.84 41.36 144.15% 291.30%
Exceptional items 6.58 22.45 -10.78 -70.69% 308.26%
Profit before tax and share of profit of equity 401.71 184.29 30.58 117.98% 502.65%
Total tax expense 157.12 121.06 113.74 29.79% 6.44%
Profit after tax before share of profit of equity 244.59 63.23 -83.16 286.83% 176.03%
Profit for the year 296.12 103.52 -45.6 186.05% 327.02%

Horizontal Analysis of HLV Ltd

There is a drop-in income of 80% from 2017 whereas a 10% growth is seen in 2019. Even though
the company has improved its revenue from operations which includes 3 to 5% other income, the
firm is generating losses continuously for past three 3 years. A major drop is seen in depreciation
cost which suggests that the company is selling off large assets to cover its liabilities which can
also be verified from the losses generated through discontinued operations.

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Horizontal Analysis of IHCL
Revenue generated is seen increasing for the past three years along with increase in their net
profit which is good sign though their growth rate is poor. 30% increase in tax expenses against
10.3% increase in revenue can support the same. An increase of 9% in depreciation cost is seen in
2019 which also suggests that company is buying large assets.

7.Vertical Analysis
Vertical analysis is a method of financial statement analysis used to compare each line item as a
percentage of base figure. In income statement vertical analysis, we see how every line item
compares to total revenue, as a percentage. Vertical Analysis for both Indian hotels and Leela
hotels is done below.
Vertical Analysis (% of Total Revenue)
2019 2018 2017 2019 2018 2017
HLV Ltd Rs. in lakhs
Revenue from operations 15434.43 13,783.52 69,994.38 97.36% 95.53% 98%
Other income 418.36 645.28 1,385.15 2.64% 4.47% 2%
Total income 15,852.79 14,428.80 71,379.53 100.00% 100.00% 100%
Food and beverages consumed 1,330.32 1,189.86 6163.62 8.39% 8.25% 9%
Employee benefit expenses and payment to contractors 6,042.82 5,809.83 19,758.05 38.12% 40.27% 28%
Finance costs 39.66 12.7 9,044.20 0.25% 0.09% 13%
Depreciation and amortisation expenses 957.52 1,326.08 20,231.98 6.04% 9.19% 28%
Other expenses 8,295.99 7,981.53 26,432.19 52.33% 55.32% 37%
Total Expenses 16666.31 16,320.00 81,630.04 105.13% 113.11% 114%
Profit/(loss) before exceptional items and Tax -813.52 -1,891.20 -10,250.51 -5.13% -13.11% -14%
Exceptional items - Profit/(loss) (net) -2966.11 -3,293.68 - -18.71% -22.83%
Profit/(loss) before Tax -3779.63 -5,184.88 -10,250.51 -23.84% -35.93% -14%
Tax expense - - 0.80 0%
Profit/(loss) after Tax from continued operations -3779.63 -5,184.88 -10,250.59 -23.84% -35.93% -14%
Profit/(loss) after Tax from discontinued operations -8113.33 2,863.23 -51.18% 19.84% 0%
Profit after Tax (A + B) -11892.96 -2,321.65 -10,250.59 -75.02% -16.09% -14%
IHCL
Income Rs. in crores
Revenue from operations 4512 4,103.55 4020.57 98.19% 98.52% 99%
Other income 83.38 61.73 54.94 1.81% 1.48% 1%
Total income 4595.38 4,165.28 4075.51 100.00% 100.00% 100%
Food and beverages consumed 404.05 376.44 363.95 8.79% 9.04% 9%
Employee benefit expense and payment to contractors 1,470.79 1,346.62 1364.65 32.01% 32.33% 33%
Finance costs 190.13 269.04 323.83 4.14% 6.46% 8%
Depreciation and amortisation expenses 327.85 301.2 299.37 7.13% 7.23% 7%
Other operating and general expenses 1,807.43 1682.35 1,710.14 39.33% 40.39% 42%
Total expenses 4200.25 4,003.44 4034.15 91.40% 96.11% 99%
Profit before exceptional items 395.13 161.84 41.36 8.60% 3.89% 1%
Exceptional items 6.58 22.45 -10.78 0.14% 0.54% 0%
Profit before tax and share of profit of equity 401.71 184.29 30.58 8.74% 4.42% 1%
Total tax expense 157.12 121.06 113.74 3.42% 2.91% 3%
Profit after tax before share of profit of equity 244.59 63.23 -83.16 5.32% 1.52% -2%
Profit for the year 296.12 103.52 -45.6 6.44% 2.49% -1%

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Vertical Analysis of HLV Ltd
Total revenue includes 2.5% to 5% income from other sources. Its seen that hotel Leela is not
managing its expenses well as the total expenses is 5 to 15% higher than its revenue for the past
three years. Majority of the expenses is incurred through employee benefits, payment to
contractors and other expenses. A continuous increase in net loss incurred with respect to revenue
generated for past three years with 2019 having highest of 75%.

Vertical Analysis of IHCL

Total revenue includes less than 2% from other sources which is less compared to that of hotel
Leela. Though the expenses are very high compared to the revenue generated, Indian hotels have
managed to control them year after year. Majority of the expense is seen in operating and
employee benefits. Net profit generated over the past three years have improved with respect to
the total income which suggests that expenses are managed in a better way.

8. Observations
Some observations made from the analysis done are highlighted below
Hotel Leela Ventures

• Leela hotels is building assets based on borrowed money when compared to Indian hotels
• Plays in the luxury segment that is very sensitive to macro-economic environment
• Has historically gravitated to asset heavy model of owning properties which raises barriers
for expansion
Indian Hotels

• Pays better dividends than Leela hotels

• Plays in all segments – budget, mid-market and upscale under different brand names
• Rapidly expanding its portfolio through management contracts and new projects
• Current liabilities are higher than current assets for both the companies

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9. Conclusion
IHCL Hotel Leela
Ratio Analysis Summary 2018-19 2018-19

Price/Earning Ratio 31.10 -2.12

Return on assets 4.38% -2.83%
Overall Performance Ratios
Return on invested capital 5.73% -11.96%
Return on shareholder's equity 5.75% -44.80%
Profit Margin 6.56% -77.05%
Profitability Measures Earnings per share 2.49 -1.89
Cash realization 2.40 -1.76
Asset turnover 0.47 0.04
inversted capital turnover 0.61 0.16
Equity turnover 0.88 0.58
Capital intensity 0.86 0.57
Day's cash (days) 1337.44 67.36
Test of investment utilization Day's receivables (days) 26.00 154.61
Day's inventory (days) 72.63 215.25
Inventory turnover 5.03 1.70
Working capital turnover -4.85 -0.05
Current ratio 0.55 0.04
Acid test ratio 0.52 0.04
Financial leverage ratio 1.86 15.78
Debt/Equity ratio 0.46 2.74
Test of financial condition Debt/captialization 31.31% 73.25%
Times interest earned 3.08 -19.51
Cash flow/debt 16.04% 5.56%
Dividend yield 0.01 0
Tests of Dividend policy
Dividend payout 0.20 0

As a shareholder, we will prefer Indian Hotels than Hotel Leela for investing.

Earnings Per
Share Price/ Earning Dividend Payout
IHCL 2.49 31.10 0.20
HVL -1.89 -2.12 0

• P/E for Indian Hotels is lower compared to the industry average. So, its undervalued at
the moment and there is scope for improvement. And at the same time, dividend payout
has been 100% in both years
• For Leela Ventures, P/E is extremely low. And there has been no dividend payout for
2018-19

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