The recent exercising of warrants by the promoters of Indian Hotels-Tata Sons, signals to the promoters' commitment to the company's business even at a time when the demand in the industry is growing at a weaker pace than supply.
The promoters have exercised the warrants at Rs103. This is at a premium of 67% to the company's current market price of Rs61. With this conversion, the company would have a cashflow inflow of Rs370 crore.
At present, on a consolidated basis, the company has a total debt of Rs3082 crore. Hence, with this cash, the company's debt to equity ratio would come down to less than 0.8 from 1. On the operational level, the company's interest cost should also come down meaningfully. More so, assuming the company's fixed operational expenses, investors can expect that the company would save on interest costs, which would translate into earnings in the coming quarters. At present, the company's interest expense as a percentage of net sales is 5.6%. This development should provide respite to the investors who have been bearish on the company's stock in the last three months. However, the stock has gained close to 5% in the last one. The only concern investors have is the company's loss-making international operations.
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At present, on a consolidated basis, the company has a total debt of Rs3082 crore. Hence, with this cash, the company's debt to equity ratio would come down to less than 0.8 from 1. On the operational level, the company's interest cost should also come down meaningfully. More so, assuming the company's fixed operational expenses, investors can expect that the company would save on interest costs, which would translate into earnings in the coming quarters. At present, the company's interest expense as a percentage of net sales is 5.6%. This development should provide respite to the investors who have been bearish on the company's stock in the last three months. However, the stock has gained close to 5% in the last one. The only concern investors have is the company's loss-making international operations.
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