Sayaji Hotels - Rs.39.00

Established in 1982, Sayaji Hotels Ltd. (Sayaji) currently manages two 3 star hotel properties, one each in Baroda and Indore. The Indore hotel, which started seven years back is situated at a very strategic location and enjoys a dominant position in the city due to its central location, club facilities and wedding packages. The hotel has around 230 well maintained rooms with 8 restaurants and 10 banquet halls. Incidentally, there is no direct competition to the hotel and it enjoys more than 70% market share. The company’s Vadodara property is twenty years old and has 73 rooms with 3 restaurants and 5 banquet halls. The ratio of overall food & beverage sales to room sales is 1.6 times as against the industry norm of 0.7.

The Hotel industry has seen a sharp revival over the last one year and given the current economic scenario, it is poised to grow further. Sayaji is no exception and enjoys best ever occupancy rates of over 75% as well as average room rate for both its properties. In FY05, Sayaji constructed and commissioned 44 rooms at Indore and also opened its state-of-the-art ‘Quorum’ longue. Riding high on the hotel boom, Sayji is expanding aggressively and its proposal for availing project construction finance from HUDCO for completing 77 additional rooms and 3 restaurants at Indore has been accepted. For future growth, Sayaji is planning to buy an existing property in Pune and also build a 5 star hotel in Bangalore with 360 rooms. It is also setting up a multi cuisine restaurant by the name ‘Kabab Ville’ whose first branch will be opened in Mumbai soon and then it will gradually open a chain of restaurants in India.

Thus Sayaji Hotels has outlined major expansion plans not only in the form of room additions but also in the form of new hotel properties and restaurants. The company virtually has no tax liability due to previous accumulated losses and subsidy from Department of Tourism (DOT), which is expected to continue for at least the next two years. To fund its expansion the company is planning to raise Rs.75 cr. through preferential allotment, which will dilute its equity substantially. So only long-term investors are recommended to buy this scrip. Its Sept.’05 numbers were quite encouraging. For FY06, it can post sales of Rs.40 cr. and NP of more than Rs.7 cr. At its current equity of Rs.7.86 cr., EPS comes to Rs.9 which may get diluted to Rs.3.5 ~ 4. A pure long term bet which can give 100% return in 18~24 months.